The dream of cashing checks that you didn’t have to work 9-5 for! Many dreamer real estate investors are looking for that one idea to start investing in real estate for passive income. So, how can the average joe achieve real estate passive income? What are the most popular ideas for passive income with real estate? And is it a good idea to keep your focus on passive income?
Ideas for passive income
Buy a rental property in your area
If you’re looking for real estate passive income ideas, this should be your number one investment strategy. According to BusinessInsider.com, focusing on income producing assets is the key to create a large enough passive income stream. This works great for beginner real estate investors and passive income seekers especially because they can attend to the investment property in their free time with ease of access!
It’s recommended to start with single-family rental properties when looking for ideas for passive income with real estate. This is mainly because you’re already familiar with running a small-scale residential property AKA, your household. Plus, dealing with one tenant who typically will treat the property like home makes being a landlord much easier.
Real estate investors with investment portfolios of all shapes and sizes look for rental properties that are close in proximity to their residence. It’s definitely a great way to start piling up rental income in your bank account.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Out-of-state real estate investing
This is for the real estate investor that does not want to attend to the property him/herself. When going for out-of-state real estate investing, investors hire professional property management companies to run it for them! Additionally, out-of-state real estate investing offers real estate investors more opportunities and more options! You do not have to be satisfied with a 4% cap rate in your local area. You can look for investment properties that provide a number higher than 6% in cap rate!
Of course, this is among the best ideas for passive income for an investor with a long-term vision for his/her real estate investment business. If you’re going for out-of-state real estate investing as a form of passive income, you need to understand that the investment property may not be generating passive income as soon as the purchase goes through. However, if you play your cards right and financially plan prior to your purchase, you can set up the property as a passive income investment.
To get more information on property management, read this blog post: Critical About Property Management Companies? Here’s Why You Shouldn’t Be.
Tip: Look for a real estate market that offers the whole package. Many investors look for states with low property taxes, others look for locations with flexible short-term rental regulations. After all, it’s about you and your vision of what an investment property that brings passive income should be like.
Crowdfunding real estate
Real estate passive income has become synonymous with real estate crowdfunding. There are many available options today all thanks to technology. Accordingly, real estate crowdfunding sites are pioneering in personalizing your investment experience by allowing you to choose which real estate development project or investment project to pool your money into.
Keep in mind that real estate crowdfunding is a form of real estate syndication; the concept is built upon raising capital between investors to make bigger and better real estate investments. Accordingly, you won’t have to manage many aspects of the investment. Just cash in those return on investment checks and be on your way!
Read this blog to get more insights on the best real estate crowdfunding websites: Best Real Estate Crowdfunding Websites: What Are They? And Should You Use Them?
Rent out a room in your residence
While renting out a room in your primary residence may not be appealing to every real estate investor, it’s among the best passive income ideas available for property owners today. Keep in mind that the space in your property is available and expenses are already accounted for. This means you won’t have to actively look for a property making it a great start to passive income. And you’ll generate a substantial amount of rental income with minimal initial costs.
To ensure the whole process will be passive, work hard on the first step: screening tenants. That way you’ll find a low-hassle tenant who will make this side business passive.
It’s also recommended to start with renting out a room in your household before you go for investing in short-term rental properties. This gives you a pretty good idea of what needs to be done and if you’re the best fit for this real estate investment strategy.
If you’re going for an Airbnb rental strategy, read this blog post: Airbnb Properties: How Does Airbnb Work for Owners?
REIT investing
REITs is short for Real Estate Investment Trusts. It’s among the best passive income ideas that incorporate real estate investing and the stock market as the head investment strategy. With REITs, real estate investors buy stock options through major stock exchanges. REITs are companies that buy, develop, and manage income-producing assets.
REITs are great passive income investments due to the minimal effort on the real estate investor’s behalf and the diversity of investments that the company handles. Additionally, Real Estate Investment Trusts must pay 90% of their revenue to shareholders. Of course, this is not the go-to real estate investment strategy for all investors. In fact, many real estate investors prefer to be more hands-on with their investment operation, which is something that a REIT does not offer.
Tips on finding the best passive income investments
Magnify your down payment
As for the case of buying any type of income property, buying a passive income property is going to require financing and initial effort on your behalf in order to cross to the point of becoming a passive real estate investment. Accordingly, putting a larger down payment on an investment property is going to help you in both a shorter payback period and lower interest rates!
And yes, you can buy an investment property with no money down as many real estate investors do. On the other hand, buying an income property with no money out of your pocket can cut a chunk out of your passive income. Keep in mind that even the best ideas for passive income are going to require a little bit of cash and a little bit of effort and hustle INITIALLY!
Read this blog post for more information about buying an investment property with no money down: How to Start a Real Estate Business with No Money in 2018.
How to find the best passive income property
While there is no right or wrong real estate property with passive income, there are certain measures you can do to find the best possible passive income property. With today’s technology becoming more reliable than ever before, real estate investors are relying heavily on an automatically generated analysis through investment property calculators to distinguish between positive cash flow income properties and negative cash flow income properties.
With Mashvisor’s investment property calculator, you can find the best cash flow income properties through the property finder. It’s an easy-to-use tool where the real estate investor can specify the city/cities, rental strategy, and budget and the AI will filter out options that don’t meet what you’re looking for. It also shows you properties with the highest ROI that do match your criteria. Real estate investing has never been easier!
Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
Keep at your real estate investment strategy
Perseverance can be salvation to those who need it. When opting for any real estate investment strategy for passive income, you must repeat your investment choices with a little bit more sophistication the second time around. For example, if you’ve bought a single-family investment property as a passive income investment, you might want to up your game and buy another one in the years to follow. This can help you diversify your real estate investment portfolio while providing you with passive income through different streams.
Final words on ideas for passive income
When looking for ideas for passive income, you must keep in mind that what works for a certain real estate investor might not work for you. In fact, it might work for you with a bit of difference here and there. So, make sure to start real estate investing to generate a substantial passive income in the years to come!
If you have any more ideas for passive income with real estate, please share them with us in the comments section.