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Real estate investing is one of the most preferred investment options of many investors today. According to a survey by Gallup, 35% of American investors consider real estate as an excellent choice for building wealth, while 21% of Americans opt for mutual funds and stocks.
The good thing is that you can invest in real estate without engaging in active property management and maintenance. This mode of investing in real estate is called passive real estate investing. Here’s a guide if you’re interested in earning a passive income through real estate properties.
Passive Real Estate Investing: What is It?
If you’re earning a passive income, it means that you’re earning profits without hands-on participation with your investment. For instance, when you invest in stocks, you can Make Money through the selling of high-value stock shares.
Passive real estate investing is just like investing in stocks. You put money in real estate projects, but you don’t have active participation in the management or maintenance of properties.
Active real estate investing, on the other hand, is managing and maintaining real estate properties for sale or rent. This kind of real estate investing requires you to put in more work than passive real estate investing.
Benefits of Passive Real Estate Investing
Passive real estate investing can be the key to achieving your financial goals. It’s almost impossible to be a millionaire working a 9 to 5 job. That’s why most people look for other sources of income that don't require much work.
Aside from earning a passive income, another advantage of passive real estate investing is that it enables you to dip your toes into real estate. It’s the goal of many investors to be involved with real estate investing, but some of them shy from putting their money on real estate because of their lack of experience in managing real estate properties.
This is where passive real estate investing is a boon for people who want to enter the real estate market. This type of real estate investing gives you the key to entering the real estate market without incurring too many risks.
How to Start in Passive Real Estate Investing
Here are a few tips that you need to consider if you want to start passive real estate investing.
Know Your Goal
You need to ask yourself questions if you’re interested in earning a passive income through real estate investing. First, ask yourself: do you want to start on this journey to generate a monthly income? Or are you planning to venture into passive real estate investing to have money during your retirement?
Next, determine how much you’re willing to spend. You should create a budget to avoid risking a significant amount of money.
Know if You Want It to be Fully Passive or Semi Passive
Investing in passive real estate can be semi-passive or fully passive. It depends on your goals which of the two you choose. If you want to be a little hands-on, you can be in a semi-passive investing mode. If you don’t have time or don’t want to put in work at all, you can go fully passive.
Diversification is Crucial
Successful investors don’t rely on just a single investment class. If you have the money, you can invest it in both passive real estate and stocks. Diversify your investment to minimize the risks.
How to Earn Income Through Passive Real Estate Investing
Direct and indirect real estate investing are two ways to generate a passive income through real estate. Here’s a brief explanation for these two methods.
Direct Real Estate Investing
Buying and owning a real estate property intended for sale or rent is called direct real estate investing. If you’re looking to make a passive income through direct real estate investing, you can partner with someone who will serve as an active investor, or you can hire a property manager to do the managing and maintenance of property for you.
Indirect Real Estate Investing
Investing in real estate without buying or directly owning a property is called indirect real estate investing. An example of this is real estate investment trusts or REITs. These are real estate assets that you can purchase and sell like mutual funds or stocks.
Another option for indirect real estate investing is crowdfunding. In this way, an investor or developer solicits funds for a new real estate project. As an investor, you can make passive income with real estate crowdfunding by the appreciation of property value in the future.
Takeaway
Now you know all about passive real estate investing. This investment method can benefit you as an investor who wants to venture into real estate and create passive income. Just be wary of the risks involved with this type of investing. Make sure to read this guide and other resources on the internet to avoid losing a significant amount of money on this investment.
