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Ask a Real Estate Investor: What’s the Best Way to Earn Passive Income?


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Everyone loves the idea of ​​making money with the least amount of effort, and real estate is a field that has a good chance of making it happen.

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Passive income doesn’t necessarily mean you sit back and watch the money roll in and do nothing, though. According to Jon Sanborn, co-founder of Brotherly Love Real Estate in Philadelphia, “Passive income is a real estate strategy through which investors can generate income without being actively involved.”

This usually means having some money as an investment before that investment pays off in other ways. Here are 10 expert-recommended ways to earn passive income from real estate.

Invest in self-storage facilities

Storage facilities are in high demand and are found almost everywhere in the U.S., making them an excellent opportunity to bring in passive income, Sanborn said.

“About 39% of real estate investors support this option and prefer it over rentals or vacation homes. Investing in a Grade A or Grade B storage facility through rentals is a safe and effective way to increase income.”

property restoration

If you’re good at renovating and redecorating, then property restoration might be the way to go. “Fixing and flipping properties requires more active roles, but can be very lucrative,” explains Sanborn.

rent part of your home

This might be an option if you’re not too comfortable with the level of work involved in your Airbnb situation (which entails playing the role of a host, plus regular cleaning and maintenance), and you have a large home with unused space. Sanborn suggests renting out ‘another part’ [of your home] Either as a short-term rental or as a studio. “

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Event rent

If homeowners have access to a second home in an attractive location such as the beach, then renting it out for events and festivals could make a lot of extra money, Sanborn said.

Another example comes from Marcia Socas, a real estate investor of over 20 years who helped her son figure out a creative way to earn passive income by renting in a small town in Alabama where she attended college. After applying for a short-term rental permit from the city, he could earn up to $1,250 a night by renting out his home on race day weekends.

“It was a passive way for him to make a huge income, which in turn allowed him to pay the mortgage. It also allowed him to own the house on his own for most of the year without having to rely on other college students as roommates. This It worked out well for him, and by the time he graduates, he should have paid off his mortgage for a few years and the house should have appreciated in value.”

land lease

Real estate investor, landlord and Sell With Richard CEO Richard Mews said with land leases you can make money without owning a building. “The land under the building that you lease to the building developer is your property. Surface leases generally carry relatively little risk and generate predictable passive lease income. In exchange for a less risky environment.”

Provide collateralized notes

Another way to earn passive real estate income is to act like a bank and offer mortgage notes to buyers, Mews said. “When you invest in notes…the buyer gives you a monthly sum of principal and interest. The buyer is responsible for the maintenance, insurance, and taxation of the asset. It is your responsibility to collect monthly checks and keep records of repayments and remaining debts.”

single-family home for rent

Shad Elia, chief executive of New England Home Buyers, said that for those who don’t have much experience generating income from real estate, a good place to start is to buy a single house or apartment and rent it out to singles tenant. Massachusetts-based real estate investment firm.

“Single-family tenants generally have a stronger psychological sense of belonging to the home, which drives them to better maintain it. However, if unoccupied, a single unit will generate zero income.”

Real Estate Investment Trusts (REITs)

One way to generate income without buying or renting any property is to invest in a REIT. Elia explained that REITs are businesses that own, finance or manage high-end or commercial buildings that generate income.

“They combine money from many investors and invest it in capital growth. REITs are an excellent source of passive income for inventors because they pay high-yielding dividend income. You can diversify yours by investing in REITs portfolio.”

Even if you don’t have a lot of money to invest, you can still get involved in real estate investing because REITs own a variety of real estate assets, Elia said. “REITs trade like stocks because they are liquid. When the market opens, you can buy, and when the market closes, you can sell.”

Using Debt to Buy Income-Generating Assets

Another strategy is to use debt to buy income-generating assets, said Colby Hager, owner of Capstone Homebuyers in Texas. “This can be done by taking out a loan to buy more properties, or refinancing the mortgage and taking some equity. Either way, the goal is to use other people’s money to buy more properties and increase the return on investment.”

Lending money to real estate investor groups

If you have spare cash but don’t want to buy anything, Melanie Hartmann, owner of Creo Home Buyers in Maryland, recommends lending your money to other real estate investors or groups.

“You can choose between fixed and flip short-term loans or long-term loans, such as syndicates of large commercial properties or apartment complexes and anything in between. No matter how much or how much you need to borrow, there are limitless opportunities to passively invest in real estate field.”

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