Landlord Blog

Education and news for smart DIY landlords!

How to Earn Passive Income From Real Estate

Investing in real estate usually involves managing everything yourself from the advertising to the paperwork. This could be a challenge if you own multiple properties, deal with a lot of tenants, or have a day job because you’re always short on time.

As a smart investor, you should find a way to make your income generation passive. This way, you’ll be able to maximize your earning capabilities. To start, you must know which investment strategies that require light management or you can leave in the hands of a professional.

1. Buy, Rehab, Rent, Refinance, Repeat

The BRRRR investment type is similar to the house-flipping strategy. But instead of just buying and selling the rehabilitated property, you’ll have it rented. Then, you use the money from the rent into buying more houses, rehabbing them, having them rented out, and keep on repeating the cycle.

This will take time but the more properties you’ll own, the higher your revenue will be in the long run. The most common drawback of BRRRR is that managing multiple properties will be hard to do alone. That’s why I highly suggest that you hire a property manager once you own 3 rental properties.

2. Buy Real Estate Investment Trust shares

REITs are like long-term stocks. You buy a share of an REIT company and leave it to them to grow your investment. The best thing about REITs is that each company has its own minimum required investment. You can even start with just $100. Seasoned REIT stockholders suggest buying stocks from multiple companies to increase your gains and outweigh potential losses.

3. Apartment buildings

If you have the money to buy a swath of land and build a multi-unit establishment, you can follow the apartment building investment model. To start being an apartment-type investor, secure a commercial loan from your bank instead of a residential loan.

Unlike the Buy, Rehab, Rent, Refinance, Repeat (BRRRR) strategy, you will face the challenge of tenant management from the get-go. Having a property manager in your early plans is essential to guarantee success in the early years of being an apartment building owner.

4. Commercial buildings

For those looking to invest in rentals with a higher promise of a more stable income, the commercial building investment model is the right model to follow. It’s because retail tenants are more likely to sign long-term leases.

The problem with commercial rental properties is that tenants are more likely to make unit customizations to fit their business needs and are harder to replace when they leave. To make your commercial property investment more successful, make plans for long-term vacancies and set a budget aside for remodeling costs between occupancies.

5. Self-storage facilities

This real estate investment strategy is still one of the most in-demand services due to the rising rate of consumerism. You can even find self-storage facilities all over the country. The drawbacks of this venture are that aside from the land and building cost, you’re going to need a lot of manpower that could work 24/7/365 and the money to pay for insurance and security expenses.

6. Mobile home parks

Due to the COVID-19 pandemic, housing prices, especially in suburban environments have skyrocketed. This makes citizens who are experiencing economic hardships and tiny home owners attracted to the concept of living in mobile home parks.

A lot of farmland owners have been converting a portion of their property to supply this demand. Some are even crowdfunding and making partnerships to buy massive areas to start this venture.

However, there are major problems with investing in a mobile home park: Water and sanitation. Because the more tenants you’ll have, the more hazardous waste is produced. It’s important to have an extensive water supply and sewerage plan to prevent the spread of diseases and make the pandemic situation worse. Consult with your local government first.

All of these real estate investment strategies are capital-intensive. Meaning, you need to have a lot of money to realize your plans. But that won’t be a problem. As long as you have a high credit score for a loan, know how to save, start a crowdfund, and have a network of real estate professionals to help you, earning a passive income from real estate won’t be impossible.