Wouldn’t it be grand to have another income stream apart from your full-time job? The extra money can go toward savings or take care of emergencies when life happens. And your real estate investments can be a good source of these additional funds.
In this article, we are looking at real estate investing strategies that are simple and accessible, and maybe get you to consider taking up a real estate master’s degree to learn more about it. Best of all, they generate passive income.
1. Real Estate Crowdfunding
Real estate crowdfunding is popular in the truest sense: it brings together investors from all walks of life on a platform where they can pool money for the development of million-dollar projects.
These real estate deals can require little capital from each investor who receives dividends or other forms of returns from the sale or rental of the property.
After completing your due diligence and making the investment, you can assume the stance of a passive yet observant investor. Joining crowdfunded deals is like owning a property that you don’t have to directly manage because real estate professionals are taking care of it.
You can choose from a variety of crowdfunding sites, which have their specialties and requirements. Get to know real estate crowdfunding platforms, as rated by investors here.
2. Real Estate Investment Trusts (REITs)
Real estate investment trusts own and operate property developments. Hotels, office buildings, resorts, and warehouses are examples of commercial real estate that REITs typically develop or manage for income-generation purposes.
They can also invest in mortgages (i.e., mortgage REITs), and if they are engaged in both property ownership and financing activities, they are considered hybrid REITs. The trusts can also be focused on a property sector or geographical region.
When you invest in REITs, you earn dividends that these companies are required to distribute. These payouts, despite fluctuating interest rates, offer a regular income stream. Moreover, returns may be higher, which would make them attractive long-term investments.
You can buy shares in REITs, which can be publicly traded, public but not listed on stock exchanges, or private, through brokers. It’s essential to know the distinction of REITs to determine their liquidity or convertibility to cash when you need to sell it.
3. Real Estate Mutual Funds
Real estate funds invest in companies engaged in real estate activities, including REITs.
Investing in this kind of mutual fund has three main benefits:
- A convenient alternative to buying individual REITs
- An instant way to diversifying your property portfolio
- A professionally managed investment vehicle
You can buy mutual fund shares on a trading platform or directly through the mutual fund company.
Moreover, you make money from mutual funds through dividends, capital gains distributions, and increased NAV.
4. Rental Properties
Renting or leasing out properties is one of the most conventional ways to earn passive income from real estate. With rental income, you have a steady flow of money every month.
You can also try different rental arrangements, whichever is more profitable and doable, based on local laws and market conditions. For example, you can rent out a house to multiple tenants or put it up as a per-night accommodation.
If buying a property outright is not a current option, you can consider renting out a spare room in your home.
You can get a mortgage for an investment property with a friend or partner. Before you sign the papers, make sure everyone understands their obligations.
Do the Math
Real estate can open many doors to make money, which would be perfect for building long-term wealth. Before you walk into an opportunity, weigh its pros and cons. And don’t hurry to avoid losing money that you could have made.