In order to understand how you can make passive income from Real Estate we must first investigate what is meant by passive income. Passive income refers to money that you make without exerting a lot of effort. Passive Income typically takes little to no effort to maintain. Which is why many of us want to know how we can increase our passive income. It gives you more time to do the things that are really important.
This is why it is so difficult to generate at the start. Often passive income requires some sort of up front cost to begin with, these can vary greatly with Real Estate. And often takes some time to come to fruition, with little to no return at the start. Nevertheless, once you have found which method works best for you and your initial investment. Welcome to the high life.
Below are 10 hacks to help you to get started on creating your own path to earning passive income from real estate. There are two main areas in real estate to start with, either renting or owning/investing. We discuss the benefits and disadvantages in further detail below.
The easiest hack to earn passive income is from your own home. If you own it, of course. Apps such as Airbnb have made it really easy for homeowners to rent out rooms or home to users. Airbnb even give you a extra peace of mind if you are worried about people in your home by offering insurance up to $1 million. It is fairly easy to start on Airbnb, and other than ensuring your Airbnb’ers are comfortable there is little to do. As their platform takes out all of the hard work. How much you can earn from this passive method is dependent on the area you live in and what amenities you can provide.
Another very similar method is renting or getting a lodger. This method typically is longer lasting than Airbnb and you can offer a range of renting time frames to best suit you. Unlike Airbnb, much of the work for this will rest on you. But you can use real estate agents to help you find a suitable lodger/renter, but will probably want to vet them yourselves as you will be living with them. This method provides a more concrete passive income as you will know how long they will be staying with you and it is often longer than that of Airbnb.
In addition to renting or lodging, a holiday home can also provide fantastic passive income. If you have a second home, that you like to visit when you are taking a break. Why not rent it out for the rest of the time? Holidayers often prefer to stay in a more homely environment instead of hotels. This could be a great method for you if you can get a property management company to help you with the maintenance. This way this hack can be truly passive.
Following on from renting a room in your home. Perhaps you have additional office space. Many small businesses may have office space that isn’t currently being occupied at its full occupancy. You can rent your extra office space out to entrepreneurs or other small businesses. Many businesses are no longer setting up large offices for the employees. People often enjoy flexible shared workspaces as hot desking is becoming more popular.
Single family homes
If you have large savings you could look into investing in properties such as single family homes. Many people are finding that renting is better for them financially due to the rise of mortgage rates. You could invest in these properties and gain passive rental income. These types of home are easier to buy, manage and maintain.
A further hack would be investing in multi-family homes this method can be lucrative if you have the spare cash as you can quickly recoup the costs through renting, but will require more effort in the long run to maintain.
Turnkey real estate
Turnkey real estate is a great passive option. This essentially means that you are purchasing a renovated property that is owned by a company, that is specialised in restoration. These often come with property management services. They will be maintained for you, meaning that all you need is the initial costs and much of the work is done for you.
Fix and flip
Flipping properties is also a great hack to earn passive income from real estate. If you purchase pre construction condos you could even find lower cost upfront with greater return on investment once they are finalised. However, if you are very hands on with the properties it can become less of a passive income option.
If the thought of owning property has no interest to you. Why not consider investing your money into a real estate investment trust. Think investing in mutual funds or stocks, but instead property. This hack sees you as a shareholder rather than an investor in estate. Properties can range from homes to office buildings. It’s a great passive income source as you will be paid in dividends and have no maintenance work to do.
The final hack is house hacking. Essentially this will allow you to live for ‘free’. You will be purchasing a multi-family home, then renting out the other units. There are many different methods of house hacking, some have made millions from this option. They utilise house hacking multiple times and reap the benefits of living for free. The rental income from your other units will be paying for your home and expenses.
The hacks provided vary and are dependent on how much spare cash you have. If you don’t have large amounts of capital available, you could look into finding investors or loans. Finding the right deals is integral in real estate. Each of these methods should be discussed properly before entering as investing in property can be risky. Financial advisors can help you work out which method is most profitable for you. Good luck!