Real estate investing can be a great way to generate passive income. Passive income refers to income that you earn without actively working for it. In other words, once you’ve put in the initial effort to acquire the property, you can earn income from it without having to put in ongoing work.
There are several different strategies you can use to generate passive income through real estate investing.
Here are some examples:
Rental Properties: One of the most common ways to generate passive income through real estate is by investing in rental properties. When you own a rental property, you can collect rent from tenants each month, which can provide you with a steady stream of income.
For example, let’s say you purchase a single-family home for $200,000 and rent it out for $1,500 per month. After accounting for expenses such as property taxes, insurance, and maintenance, let’s say you’re left with a net rental income of $1,000 per month. Over the course of a year, that would amount to $12,000 in passive income.
However, owning rental property can also come with significant risks and responsibilities. For example, you’ll need to find reliable tenants, maintain the property to keep it in good condition, and navigate the legal and regulatory requirements of being a landlord. There’s also the risk that tenants may damage the property or fail to pay rent, which can lead to financial losses and legal disputes.
Before deciding whether to purchase a rental property, it’s important to do your research and carefully consider the potential risks and rewards. You may also want to consult with a real estate professional or financial advisor to help you make an informed decision that aligns with your goals and risk tolerance.
Airbnb: Another option for generating passive income through real estate is by investing in Airbnb properties. With Airbnb, you can rent out your property on a short-term basis to travelers. Depending on the location and demand, you may be able to charge more for an Airbnb rental than you would for a long-term rental.
For example, let’s say you purchase a two-bedroom condo in a popular tourist destination for $300,000. You decide to rent it out on Airbnb for $200 per night. Assuming you have an average occupancy rate of 75%, you could earn $4,500 per month in rental income. After accounting for expenses such as cleaning fees and Airbnb’s service fee, let’s say you’re left with a net rental income of $3,500 per month. Over the course of a year, that would amount to $42,000 in passive income.
Real Estate Investment Trusts (REITs): If you don’t want to own physical property, you can still invest in real estate through REITs. A REIT is a company that owns and manages a portfolio of income-generating real estate properties. When you invest in a REIT, you receive a portion of the income generated by the properties in the portfolio.
For example, let’s say you invest $10,000 in a REIT that has a dividend yield of 5%. That means you would receive $500 per year in passive income from your investment.
Real Estate Crowdfunding: Another option for investing in real estate is through crowdfunding platforms. With real estate crowdfunding, you can invest in specific real estate projects alongside other investors. Depending on the platform and project, you may be able to earn a share of the rental income or a percentage of the profits when the property is sold.
For example, let’s say you invest $5,000 in a real estate crowdfunding project that has an expected return of 10% per year. Over the course of a year, you would earn $500 in passive income from your investment.
Real Estate Notes: Real estate notes are a type of investment where you purchase the debt on a property rather than the property itself. When you invest in real estate notes, you receive regular payments from the borrower in the form of principal and interest. You can purchase real estate notes directly from banks or through peer-to-peer lending platforms.
For example, let’s say you purchase a real estate note with a face value of $100,000 that has an interest rate of 6%. The borrower makes monthly payments of $600, which includes $500 in principal and $100 in interest. Over the course of a year, you would receive $7,200 in passive income from the investment.
When it comes to real estate investing, it’s important to do your research and understand the risks involved. However, if done correctly, real estate investing can be a great way to generate passive income and build wealth over time.
How to find property
When searching for a property to invest in, there are several methods you can use depending on your financing options and investment goals. Here are three common methods to consider:
Buy in Cash: If you have the funds available, you may be able to purchase a property outright with cash. This can be an attractive option for investors who want to avoid taking on debt or who are looking for a quick and easy transaction.
To find properties that can be purchased with cash, you may want to start by searching online real estate marketplaces like Zillow or Realtor.com. You can filter your search by price range and location to find properties that fit your budget and investment goals. You can also consider working with a real estate agent who specializes in investment properties, as they may have access to off-market deals that aren’t listed publicly. Another option you have is to expand your network and seek advice from local investors. For example, if you are planning to work in the Milwaukee area, you might want to search for a Milwaukee cash home buyer who can mentor you and introduce you to potential deals.
Owner Financing: Another option for purchasing a property is to work out a financing arrangement with the seller. This can be a good option if you don’t have the funds to purchase the property outright, or if you want to negotiate more favorable terms than you would be able to get from a traditional lender.
To find properties with owner financing options, you may want to search online classifieds sites like Craigslist or Facebook Marketplace. You can also network with other investors and real estate professionals in your area to find leads on off-market properties that may be available for owner financing.
For example, in Milwaukee, you could search for properties listed with owner financing terms in neighborhoods like Sherman Park or Washington Heights. You could also attend local real estate investor meetups or join online forums to connect with other investors who may have leads on owner-financed properties.
Subject-to: A third option for purchasing a property is to take over the existing mortgage payments through a “subject-to” arrangement. This can be a good option if the seller is facing financial difficulties and needs to sell the property quickly, or if you want to avoid taking on a new mortgage.
To find properties that can be purchased subject-to, you may want to search online classifieds sites or work with a real estate agent who has experience with creative financing options. You can also consider reaching out to property owners who are facing foreclosure or who have recently experienced a major life event, such as a divorce or job loss.
For example, in Milwaukee, you could search for properties listed for sale by owners who are facing foreclosure in neighborhoods like Silver City or Avenues West. You could also network with other investors and real estate professionals in your area to find leads on off-market properties that may be available for a subject-to purchase.
In summary, there are many different methods you can use to search for properties to invest in, depending on your financing options and investment goals. By doing your research and exploring different options, you can find properties that fit your budget and investment strategy in the Milwaukee area or any other market you’re interested in.
