Real Estate Passive Income — The Truth | Shane Lifeman

March 11, 2023

Real Estate Passive IncomePhoto byKostiantyn LionUnsplash

Are You Up For The Work?

Do You Want To Earn Passive Income, Then Ask Yourself These Questions

  • What are your goals when it comes to passive income
  • Are you willing to invest any finances to generate this income
  • How much work are you willing to invest to earn this income
  • When do you want to start seeing a return and how much of a return do you want
  • Do you have any skills to contribute to your passive income goals

Answering these questions is critical as you want the best fit for yourself just like you would want with any business venture

I have been generating a passive income now for a while. I started with real estate and became a landlord for both residential and commercial properties. I had a total of 7 rental units before selling everything off. I’m on Amazon KDP with over 235 books, 3 channels on YouTube (close to being monetized), GumRoad, and Blogging. I also receive an annuity payment from my Investments. It’s because I have put in place everything that I have listed above that I can live a semi-retirement lifestyle for 4 years now.

What Does It Take To Create A Passive Income Stream

I will tell you straight up. It takes a lot of work and planning to create this form of income. In some cases, it also takes a lot of money. Now the question is, how much work does creating a passive form of income take and how much money is needed, let’s take a look at Real Estate as a form of passive income so you can get an accurate picture.

Real Estate

Real estate income is one of the few forms of passive income where you can start making a nice amount almost right from the start. There is the income generated from the rent that is paid to you as well as the building appreciating in value.

Getting started doesn’t have to take a whole lot of money as you can rent out a room in your home, a garage, and or storage space in your yard. I have known several people over the years who used these tactics to pay their property overheads so they were living for free. The downfall to this, you can lose your privacy and you could end up with strangers living with you.

Once you have purchased your first property and have equity in the property. Most investors will leverage this equity to purchase more properties and increase their cash flow. That’s how large real estate investors acquire so many properties. They don’t use their own money, they use someone else’s which is typically the banks. You just have sure that when you set the rent amount. It covers all expenses and then some

Purchasing a Property to Rent Out

This will require some funds. At the bare minimum, you will require a certain percentage of the purchase price to secure funding for the purchase. This is usually dictated by your finance company and varies. Where I lived. The finance companies wanted a minimum of 25% of the purchase price as a down payment if it's not your primary residence. If you intend to live at the property, then it's just 5%

With rental properties, there is work involved. You will be dealing with both tenant and building issues, and possible neighbor complaints, and can be nothing but a big headache for you unless you hire a property management company that will take care of everything for you. If you hire one of these companies, then yes rental properties can be a truly passive form of income as they will send you money every month if things are set up correctly. But they can take up to 30% or more of the income generated. If you opt to do everything yourself, depending on how many rental units you have, you could be in for a lot of work with a small return, until you sell. That's where you make the majority of money with rental properties. It’s not in the rental income, it’s in the sale of the property. That statement also depends on the location and the purchase price of the property.

I have found when it comes time to sell the property. To maximize your return on your investment. I prefer to sell under the rent-to-own concept. This is where you bring in a tenant with the intention of them buying the property after a certain timeframe. Typically you can get your full asking plus the rental income over that time frame. This will also all come down to the agreement you have in place with the tenant potential buyer.

Another form of passive income through real estate is investing in a real estate investment trust aka Reit. A Reit invests in real estate in several ways, through buying, renting, and supplying the financing for purchases. With Reit investing. You don’t actually own the property. But you buy shares in the properties. Your money is pooled with other investors for the investment

To start investing in REIT’s depending on the REIT, you can start for as little as $100 — $1000. All it takes is opening up a brokerage account and start buying into the REIT that you like.

How Much Money Can You Earn Investing In REITs

When it comes to investing in REITs, you can expect an average return similar to or slightly better than the S&P500. It comes down to the REIT you invest in and how well it’s managed. Just like any form of investing, the more you invest, the more you stand to make, but the more you could stand to lose.

When it comes down to creating a passive form of income. You will need to take the time first and educate yourself in every aspect of what you want to do, to create this income. You also need to assess the risks involved as with any form of investing, nothing is guaranteed.

Living Life Living Free

Shane Lifeman

Please Click "follow" to see my future articles about what I like to refer to as living life living free. I write about living life in general, working from home, establishing personal finances, side hustles and more.

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