Passive income allows you to earn that requires minimal active effort. It is the opposite of active income, where active involvement is needed, like a job or business venture to generate income.
Even with a full-time job, passive income can be earned in several real estate options, such as managing rentals or investing in commercial properties. Whatever goal you have in mind, whether it is early retirement, travel, or acquiring more businesses for security, building passive income is the route.
Once your real estate investments have taken shape, they can generate income independently, even if you are tied down with a regular job. It can create income even while you are ‘sleeping .’ Earnings from your passive real estate income are a great solution provider. You can use it to increase savings, pay for your kid’s education, pay off outstanding debts, and even be used it as capital for other businesses. In addition, you can use your earnings as a retirement fund. Ultimately, passive real estate income is a outstanding way to earn your way to achieving financial independence.
Types of Real Estate Passive Income
Before deciding which real estate option, you want, identify your goals, cash flow, and the time you can commit to this type of investment.
Here are a few real estate investment options to consider.
- Single-Family Home (SFH)
SFH is one of the most common options for real estate investment. It is a stand- alone rental property in the form of a house or condo unit. Once purchased, you can have the property rented out to a tenant (single, couple, or family) that provides long-term asset growth and monthly income. However, SFH can also be risky, as turnovers and vacancies equate to income loss for landlords. - Multi-Family Units
Acquiring multi-family units like a duplex, triplex, or quadplex can create passive income from several tenants while managing one property. Passive revenue is easier and more significant than a single ‘family’ property. However, you must simultaneously manage several leases, tenants, and potential vacancies. - Apartment Buildings
Apartment buildings can generate a higher passive income, especially if you have five units or more. However, investing in apartment buildings involves a ‘proactive’ process. As such, hiring a property manager and key staff to oversee the property and manage the upkeep of the property (repairs, updates, etc.) will help a lot. - Storage Units/Facilities
You can earn passive income from purchasing storage unit facilities in demand in urban and rural communities.
With multiple units and relatively low overhead, storage facilities can be a significant way to build passive income.
When investing in storage facilities, consider the cost of property management, customer access, insurance, and security. Income or revenue depends on the units you acquired. - Vacation Homes
Another lucrative investment is income generating. Eye a vacation property that you and your family regularly visit. You can use the vacation property on certain weeks and rent it to local and foreign tourists for the rest of the year. Keep in mind that the cost for the upkeep of the property includes home-related expenses like repairs, updates, insurance, and management.
When you have a vacation property, you need to know about local tourism, tourist trends, and seasonal vacancies. - REITs
Real Estate Investment Trusts (REITs) are companies that own, finance and manages real estate properties. You invest by purchasing property shares and potentially earning from acquired assets.
Investing in REITs requires minimal involvement. When the property increases in value, your shares increase too, which you can sell at a higher price. Or if you keep these shares, you can receive dividends providing you with a passive income.
- Commercial Property
When you have sufficient cash flow, you can also purchase a commercial property, such as a commercial building or a mixed-use property (residential/ commercial). Investment of this type can bring in stable passive income with long- term tenants. Generally, acquiring a commercial property is a capital-intensive venture involving business partners who can provide capital.
Commercial properties can bring in stable passive income with long-term tenants. However, be sure to account for lengthier vacancies and higher remodeling costs.
So, you know the most common types of passive real estate investments. Now how do you get started investing in real estate? There are three key steps you should take.
Final thoughts
Investing in real estate can help you build a steady financial plan supporting your goals. Real estate investments are lucrative passive income streams that can sustain and help you achieve financial independence. There is an investment option that is a right fit for your time and capital to invest. Keep in mind that passive investment income reaches its full potential in time.
