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

Female real estate investor looking at future home


Everyone likes the idea of ​​making money with minimal effort, and real estate is one area where it’s possible.

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However, passive income doesn’t necessarily mean sitting around doing nothing and watching the money come in. According to Jon Sanborn, co-founder of his Brotherly Love Real Estate in Philadelphia, “Passive income is a real estate strategy that can generate income without the active involvement of the investor.”

Often that means putting some money up front as an investment before that investment pays off in other ways. Here are 10 ways experts recommend to earn passive income through real estate.

Investing in self-storage facilities

Storage facilities are in demand and can be found almost everywhere in the United States, Sanborn said, making them a great opportunity to bring in passive income.

“About 39% of real estate investors vouch for this option and prefer it compared to renting or vacation homes. It’s an efficient way.”

Property regeneration

For those who are good at remodeling and redecorating, property revitalization may be the best way to go. “Modifying and reversing properties requires a more active role, but can be very lucrative,” he explains Sanborn.

rent part of your house

This does not adequately correspond to the level of work associated with the Airbnb situation (having to act as a host and perform regular cleaning and maintenance), and having large residences with unused spaces. Might be an option if you have one. Sanborn recommends renting the “leftovers” [of your home] As a short term rental or studio rental. “

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event rental

If homeowners have access to a second home in an attractive location like a beach, they can make a lot of extra income by renting it out for events and festivals, Sanborn said. I’m here.

Another example is Marcia Socas, who has been a real estate investor for over 20 years. She rented a house in the Alabama town where her son attends college and helped come up with creative ways to earn a passive income. After applying for a short-term rental license with the city, she can make $1,250 a night by renting out her home on game weekends.

“It’s a passive way for him to make a big income, which helps him pay his mortgage. It also means he doesn’t have to rely on other college students to be roommates, and he can keep the house for most of the year.” It’s worked out so well for him that by the time he graduates, he’ll have several years of mortgages to pay off and the house should be appreciating in value. .”

Land rental

According to Richard Mews, real estate investor, landlord and CEO of Sell With Richard, leasing land allows you to make money without owning a building. “The land under the building that you rent to the building developer is your property. Ground leases are often relatively low-risk and generate predictable passive lease income. Lower return prospects in exchange for a smaller risk environment.”

provide mortgage notes

Another way to get passive real estate income is to act like a bank by providing mortgage notes to buyers, Mews said. “When you invest in a note, the buyer pays monthly principal and interest. The buyer is responsible for maintaining the property, insurance, and paying taxes. It is your responsibility to do so.”

rent a detached house

New England Home Buyers CEO Shad Elia says that for those who don’t have much experience in making income through real estate, buying a house or condo and renting it out to a single tenant is a good place to start. I guess. A real estate investment firm based in Massachusetts.

“Single-family tenants typically have a higher psychological sense of ownership of their homes, which motivates them to better maintain their homes. However, single units generate zero income when not in use. “

Real estate investment trust (REIT)

One way to generate income without buying or renting real estate is to invest in a REIT. A REIT is a business that owns, finances, or manages revenue-generating high-end or commercial buildings, Elia explained.

“They combine money from many investors to invest in capital growth. REITs are a great source of passive income for inventors because they pay high-yielding dividend income. We can diversify.”

REITs own a variety of real estate assets, so even if you don’t have much money to invest, you can still participate in real estate investment. You can buy when it opens and you can sell when it closes.”

Use your 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 property or by refinancing a mortgage and withdrawing some of the equity. Either way, the goal is to use other people’s money to do more It’s about buying more properties and increasing your return on investment.”

Loans to real estate investor groups

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

“There are options for short-term financing through fix-and-flip or long-term financing, such as syndication in large commercial and multi-family properties. I have.”

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