You’ve probably always dreamed of owning a home, but did you know that apart from homeownership, such property can also be a source of passive income?
And having passive income is an excellent way to achieve financial freedom wherein you’re able to build a solid nest egg for retirement, speed up paying off debts and inflate your life savings.
If you’re interested in investing property and creating an additional passive income stream from it, here are the ways to success:
1. Rental Property
Rental property is probably the most straightforward and accessible means of generating long-term passive income from real estate.
With rental property, you acquire a property that you can rent out to tenants, but you’re still responsible for paying the home’s mortgage, maintenance, tax expenses and other form costs that come with home ownership.
But it can also be a lucrative source of passive income particularly if you:
- Charge the right rental payment. Ideally, your rental income should exceed what you pay in mortgage, taxes, maintenance, and property management services.
- Select a good selection, even if it’s out-of-state. You want the rental property location where there are a lot of potential occupants (college students, for example), high occupancy and a booming local economy. If the location is out of your general area, you can always hire a property manager to oversee things for you.
2. House Flipping
House flipping is the process of acquiring an undervalued property, fixing it up and then selling it for a profit.
This method is ideal for short-term investors who have the time and resources to spend on home improvement, which in the process, boosts the home’s value.
To become a successful house flipper, you need:
- A good amount of cash at hand. It’s essential for house flippers to be able to readily pay for a property they want to flip as well as being able to afford the renovations without making a massive credit card debt.
- Determine the best neighborhoods to buy and sell. Once you’ve got the house all fixed up and it’s ready to sell, you want to have a good market for it. Without interested buyers, you could end up with an extra mortgage to pay, debts from renovation and utilities. An excellent location half ensures that you’ll get your ROI and a reasonable profit in a short time, and then you can resume flipping the next property.
- Be financially savvy about renovations. When you spot a potential property to flip, you must run calculation of how much repairs would cost. Ideally, the property should be structurally sound and require some minor updates. You also need to be aware of which home improvement projects will sell the property quickly.
3. Real Estate Sharing Economy
The sharing economy with the likes of Airbnb is another lucrative way to make passive income out of your real estate investment.
Real estate sharing economy is an investment opportunity wherein you offer alternative accommodation instead of traditional hotels to tourists and travelers.
The concept is simple: you offer your spare bedrooms to guests in exchange for a nightly rate.
It’s an excellent solution for tech-savvy investors to make passive income, particularly if you happen to be in a good location (near tourist destinations and college towns, for instance).
To be a successful landlord for alternative accommodation, consider:
- Touching up the bedroom or guestroom. It helps to provide functional items like a wi-fi connection, flat iron and blow dryer. Beautiful decors also add to the value of the place. It doesn’t hurt to be updated with the interior design trends from time to time.
- Giving the best customer service. Guests tend to remember how they’ve been welcomed and treated by their hosts, so making sure that your guests were comfortable during their stay is a primary driver for future occupancy. Focus on providing a smooth checking in and out process as well as other services such as laundry, dining, touring and so on. The more guests feel at home the likelier it is for them to leave favorable ratings and reviews.
Your real estate property can be an excellent source of passive income, but it’s also a very bold move that needs careful study and consideration.
If executed properly, that extra property you have lying around could very well turn into a money-making machine with little input from you. And that’s the whole point of passive income – to make money even while you’re sleeping.