Real estate is often regarded as one of the best investments you can make, and rightfully so, with the world’s wealthiest oftentimes attaining that designation through the benefits of real estate investment. In 2021 alone, real estate values have gone up a staggering 19% across the country, providing investors and regular homeowners alike a financial boost during a difficult time in the global economy. There are quite a few benefits to investing in real estate over other types of investments, but perhaps one of the most sought after features of real estate investing is the ability to earn passive income.
What is Passive Income?
Passive income is earning money without actively being involved in the process, such as with dividends earned from stock, bonds, a business requiring minimal supervision, or rental income derived from a real estate investment. Obtaining enough passive income to meet living expenses is a goal many people are looking to achieve, as passive income allows investors to either have multiple income streams at once or to continue living without having to actively work to survive. Why would someone choose real estate over the other passive income methods?
Why is Real Estate Investing a Good Way to Earn Passive Income?
While there are certainly a few drawbacks to real estate investment as it is illiquid, there are some substantial benefits that make parking cash longer term more than worth it. Besides the already stated benefit of passive income, real estate also allows the owner a tangible asset that can be utilized if the situation arises. If needing the assistance of a mortgage, real estate is a great way to build up equity in an asset with the help of credit. Also, investing in real estate is generally safer than investing in stocks because values do not fluctuate as wildly as they are able to with stock investing. Reaping the many benefits of real estate investment, especially the ability to earn passive income, can actually be achieved by most anyone.
How To Be Successful at Real Estate Investing
Setting up a real estate investment to earn passive income usually follows these three steps.
Purchase a Property
The first step is to find a property located in a suitable location to gather rental income like a growing urban center or suburb receiving population spillover from a major city. If you are unlike most people and already have a large sum of cash to make your investment, you should be able to find some great deals because of the ability to offer the seller quick cash with minimal hassles. However, the majority of people need the assistance of a loan to afford real estate investing. Mortgages are one type of loan but are usually slow and complicated due to stringent processes by banks. Hard money loans are often a better option for real estate investors looking to create a passive income stream from rental income.
Complete Any Repairs or Remodeling Needed
It’s essential to take into consideration the condition of the house, as repairs or remodeling is likely needed before tenants move in, so investors should verify they have enough money to get the house into rentable condition during the purchase process.
Hire a Property Manager
When the house is ready for tenants, many real estate investors find it’s easiest to hire a property management company to oversee their property investment in order to make the income received truly passive. Property management companies handle the general maintenance of the property, tenant interactions, tenant turnover and collect rents on behalf of the property owner. Monthly income earned from the rental property is then used to pay down the loan if necessary or goes directly into the property owner’s pocket.
Are you interested in obtaining a rental property as a way how to make passive income but don’t currently have the necessary funds to purchase a property? EMCAP Lending can help you!
Pre-qualify for a hard money loan from us today and get started on your journey towards the abundance of life opportunity that passive income affords.