How To Earn Passive Income In Real Estate

How To Earn Passive Income In Real Estate
by Kevyn Pitts - October 25, 2021

The real estate market is always on the rise, and it is turning into a popular choice for an income stream. While many are entering the business directly as realtors and real estate agents, there are also those who attempt to use it as a secondary means of income alongside their day job; investing, and earning from real estate- without taking up their time.

So, we consulted the experts, who have shared excellent means of earning a passive income in real estate;

REITs

A real estate investment trust (REIT) is a corporation that owns and manages income-producing real estate. REITs are usually high-end or commercial buildings that vary with the stock market. Because you hold a part of the fund, REITs enable you to invest in real estate passively. Rental payments are sent monthly, quarterly, or annually to REIT owners. Investors in REITs get dividends, similar to dividends from specific equities, which are typically greater than other stocks. One advantage of REITs over other real estate investments is that you may sell them at any moment. 

Investing in a REIT is easy and inexpensive using a brokerage account. If picking from hundreds of publicly listed REITs seems daunting, try a real estate exchange-traded fund (ETF). Professional fund managers choose REITs to invest in and utilize investor funds to purchase REITs in groups. If you want an ETF, your choices are much smaller. Real estate investment trusts and exchange-traded funds are taxed on capital gains rather than passive income. 

Despite the tax classification, it is a passive income. In a difficult market, a REIT investment may lose value, so do your homework beforehand and be prepared to keep assets for a long time.

Gerrid Smith, CEO & Founder of Property Tax Loan Pros

Lease Your Property as Storage

There are a lot of unique ways to earn passive income. Most people just lease a property to a tenant, but you can also buy owner-financed notes that have been aged and have a good payment history. We once had a client who had used a vacant property to store important files for lawyers, so the options are pretty endless.

Corey Chappell, Closing Options Analyst

Rental Properties

One of the most lucrative ways to generate passive income in real estate is through rental properties. Purchasing a property for rent does not require any active work on your part, other than making sure you can cover the monthly payments. This may be difficult if you are new to investing, but it will pay dividends later on.

Another way to make money passively using real estate is to buy properties that need repair. Fixing these properties up and increasing their value will provide you with cash flow for years to come. Again, this can be difficult if you are new to investing, but it's another excellent way to generate passive income over time.

I want to mention the other two ways rely more on using your time, but are still outstanding. They include flipping houses and wholesaling properties. Flipping houses is finding a fixer-upper in need of some love, buying it for a lower price, then selling it when you have made repairs to it. You can also do this with plain houses without any work needed, but they will earn less money. 

Wholesaling is looking for property owners looking to sell quickly, buying it under market value, then reselling it to someone who will be able to pay more than you did.

Mark Wolens, Principal & Director at Independent Property Group

Mobile Home Parks

Mobile homes are an appealing housing alternative for those who are experiencing financial hardship or who live in areas where house prices have risen. Typically, investors who operate a mobile home park control the land and receive rents from people who want to park their mobile homes there. Because this is a capital-intensive transaction, investors will frequently invest as part of a fund or numerous partnerships. 

Gerrid Smith, Chief Marketing Officer at Joy Organics

Real Estate Syndications

A way to gain passive income in real estate is with real estate syndications. With this method, you are not buying a fund, but rather, you get a specific realty residential property and become a proprietor of the asset. As the owner of the realty asset, you have much more possibilities to raise your tax benefits as a passive financier. 

Lisa Lacey, CEO of Lisa Buys Austin Homes

  1. Own and Collect or Invest and Collect

In my opinion, there are two ways to earn passive income in real estate:

  • Own a property and collect the cash flow. Generally, this will take a lot of capital, but it is easier to get started.
  • Invest in other people's properties and collect the cash flow. There are more opportunities for risk here but also more potential upside.

Income from real estate should be seen as an additional part of one's retirement plan rather than their only form of retirement income. It can be advantageous as a complement to other sources of retirement income.

Katherine Brown, the Founder & Marketing Director Spyic

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