4 Ways to Build Real Estate Passive Income
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When you first hear about real estate passive income, it can all sound too confusing to even consider. Finding properties, going through the complicated buying process, fixing them up and finding tenants: who has time for all that? While owning your own properties outright is one way to build passive income from real estate, it’s not the only way.
Crowdfunded Real Estate
If you aren’t ready to invest in whole properties, you can use the trend for crowdfunding to your advantage. Crowdfunding real estate allows you to make smaller investments and become part of a Real Estate Investment Trust, or REIT. You invest, and someone else does all the work of finding and maintaining the properties.
Consider just one of these sites: Rich Uncles. You choose how many shares you want to buy, and each gets you a small piece of an REIT. Rich Uncles cuts out the middleman, so there are no brokerage fees, and you get paid dividends from the monthly rent payments by tenants in Rich Uncles’ properties. There are other similar sites, and each requires a different level of investment and focuses on different types of properties.
Buy Stock in an LLC
This type of investment is similar to a crowdfunded investment, but in this case, you’re buying stock rather than becoming part of an REIT. While crowdfunding typically brings in monthly dividends, you make stock investments over terms. Six to 12 months is the typical minimum term, and there are equity investments of three to 10 years, as well.
It’s more difficult to qualify to take part in these investments, but the companies, like Realty Mogul, are usually pickier about the properties they buy. This makes them a slightly higher cost but also a slightly safer bet.
Invest in Farmland
If you qualify as an accredited investor, you can use a site like Acre Trader to invest in farmland. This isn’t the traditional real estate investment path, but it’s actually very stable compared to other types of real estate investment, with much lower volatility in the market.
If you choose this route, you’re buying shares in an entity that owns farmland and rents it to farmers. The thing to note here is that these are long-term investments. You see dividends once a year, and the lowest risk properties return somewhere in the neighborhood of 4%. In most cases, you’re holding on to shares for three to five years, and sometimes up to 10.
Add Revenue Streams
If you’ve already made some real estate investments and own rental property, you can build your passive income by adding on additional revenue streams. Adding vending machines and coin-operated laundry facilities are great ways to bring in more passive income without having to buy another property.
Depending on the type of property you have, consider contracting with service providers and then offering these services to your renters for a fee. If you’ve got a deal with a cleaning service to clean for $30 a week, for example, you could offer a cleaning service to new tenants at $40 and keep the difference.
Real estate investment has always been one of the best ways to grow your personal portfolio. There are many ways to invest in real estate for passive income. Some are very hands on, while others can be extremely passive. It is up to you to decide what works best for you. Use our Resources page to learn more about how to gain the financial freedom you’re looking for.