Passive Real Estate Investing is a popular way to diversify your portfolio and potentially increase your income. However, it can also be risky if you’re not careful. Fortunately, there are several ways to make passive real estate investing work for you.
One way is to invest in long-term rental properties. This can be done through a variety of methods, including investing with syndicators or funds that focus on this type of property. Another way is to use a third-party property management company. This will allow you to own the property but let someone else handle all the leasing and maintenance.
A third option is to invest in real estate investment trusts, or REITs. These are publicly traded companies that own and operate income-generating real estate. By law, they must distribute at least 90% of their taxable income as dividends to shareholders. This can be an attractive way to invest in real estate passively, as it can yield high levels of income without much effort.
Another form of passive real estate investing is to purchase turnkey rentals, or fully leased single-family homes. This can be a very profitable and passive investment, but it’s important to do your research first. This includes understanding the local market, ensuring that municipal zoning procedures are followed correctly, and ensuring that construction costs and timelines are kept on track. It’s also important to thoroughly screen tenants, as a bad tenant can cost you thousands of dollars in repairs and lost rental income.
In addition to these passive investments, you can also choose to invest in private equity real estate, or self-storage, which involves partnering with an experienced sponsor or general partner. These sponsors will scour the market for potential investments and select those that offer the highest return with the lowest level of risk. They’ll also help you secure financing and manage the day-to-day operations of the property.
There are also passive options for those who want to get involved in fix and flips but don’t have the time or resources to do it themselves. These options include hard money lending and utilizing a flipping manager, where you’ll provide the funds to a project that is managed by someone else.
No matter what type of passive real estate investing you choose to get involved in, it’s important to consider your own financial situation and how hands-on you’d like to be with your investments. With proper planning and research, passive real estate investing can be an excellent way to build your wealth while reducing your stress levels.