Generating Passive Income Through Real Estate Investments
Real Estate has always been a good field to make investments and earn passive income. Other investment methods like REITs also help earn money effortlessly. In this article, we cover how a real estate investor can earn marketing through passive income.
Understanding Real Estate Categories
Real estate can be classified into four main types:
Residential Property: These include any real estate that strictly houses living individuals such as homes, condos, flats, and farmhouses.
Commercial/Retail Property: This includes any building like offices, shopping complexes and malls that are meant for business purposes.
Warehousing Property: These are locations that specializes in storage systems comprising of spaces for storage and provision of logistics services.
Industrial Property: Incorporates all forms of factories and other buildings where major manufacturing and production activities occur.
How to Begin Earning Through Real Estate
Evaluate Existing Properties
Look for opportunities in your existing portfolio. Ensure to highlight assets that underperform or simply do not meet any commanding returns. Assets with low performance can easily be liquidated or turned into productive generating sources.
Invest in High-Yield Properties
Tax benefits often come hand in hand with commercial, warehousing, and industrial properties which typically yield about 6% in rent per year. These properties lease to businesses which offer better rental payment security than what residential leases do.
Repurpose Unused Spaces
Unused or poorly kept properties can always be turned into profitable business opportunities. As an example, an old building can be turned into a workforce hostel to house professionals and guarantee consistent monthly income.
Consider Pooled Property Investments
If you want to invest in a huge property but do not want to fully purchase it alone, try pooled property investments. Multiple investors come together to buy and manage investment properties. Each investor receives a share of the rental income without incurring the investment costs alone.
Modern Real Estate Investment Methods
- Real Estate Investment Trusts (REITs):
Investors looking for easy and less formal methods of investing into real estate without overboard expenditure can buy shares in REITs. This company constructs and leases out huge properties while paying dividends out of the rental income. This allows investors who want to make passive income to start with little investment.
- Tax Advantages:
Investments in industrial and warehousing properties typically incur tax advantages in the form of deductions which makes net returns even more favorable.
Steps to Achieve the Desired Outcome
Review your portfolio: Take ten minutes to review your assets in properties other than those which are personal use or necessary for running a business.
Liquidate: Dispose non-performing assets to increase liquidity.
Invest in Commercial Real Estate: Acquire, or pool invest into, high yielding commercial or industrial properties.
Invest in Emerging Business Models: Old buildings can be converted into hostels or you can invest in REITs.
Reinvestment During a Financial Windfall: Spending upon getting a new job, or a bonus, or any other significant fund is irresponsible.
Final Thoughts
Increase the depth of your portfolio by adding high cash flow real estate.
Strategically invest to achieve a minimum rental yield of at least 6 percent.
Use REIT for passive real estate investment without spending much cash.
Repurpose space with little to no use and turn it into income generating assets.
Emotional purchasing should be avoided. Focus on income generating assets.
With a coherent strategy, passive income can be generated from real estate that ensures long-term financial independence
