Real Estate: A Passive Income Source

Income sources are either active or passive. The funds you bring in are considered active if you get them as payment for a product you sell or a service you provide. The fortnightly or monthly salary that you get from employment is an example of active income. On the other hand, passive income comes effort-free. It may be in the form of investment profits, commissions, tips, or incentives. The most common passive income source is the investment profit from Real Estate.

As you may already know, real estate is property owned in the form of land, house and lot, residential or commercial building. There are different ways real estate can yield consistent income. Below are some great reasons why you must have Real Estate as a passive income source.

Why Should You Consider Real Estate as a Passive Income Source?

Tangible Possession

When you buy a house, you acquire a property that is material. It is something you can sell at any time. Real Estate prices depend on quality, market value, and accessibility. This is a material investment that can increase in value over time. You can use this asset as a location for providing products or services. For instance, you own a shop where you can display your goods. You don’t need to pay for commercial space as you already have one.

Investment Leverage

Most real estate acquisition schemes are made easy by developers. They encourage buyers to have a property by getting a loan payable in monthly or annual installments. It becomes an advantage when the owner leases the property and the lease amount is higher than the regularly paid installment amount. Real estate is almost always going up in the investment market.

High ROI

Property purchased and developed guarantees a high return on investment (ROI). When maintained well, these material possessions can be sold at a much higher price. The idea of build and sell comes out of this scenario. Wise investors earn at least 20% of their capital in at least a year or two. The higher the Real Estate investment, the higher the ROI.

Value Appreciation

Real estate value almost always increases over the years. And when it does, the appreciation ranges from high to very high. Spare funds garner more passive income than a day-to-day profit earned from a product sold when put to real estate. Regardless of the location, the increase in the market value of estates and properties usually is positive.

Consistent Rental Yield

Airbnb and similar rental schemes made property owners grow richer even while they sleep. Taking away maintenance and management cost, rental earnings of a real estate unit is stable and consistent. The initial investment paid upon purchase will have a quick income yield almost immediately.

Now, say you now have a real estate investment. You might be pondering around this time whether or not you will hop in and invest in another one. What’s next for you? What are the best real estate properties you can purchase, and what are the tips to make it your money-mill?

What Types of Real Estate Properties are There?

Residential

An existing estate may be rented out to an individual or family. You can simply collect monthly or annual rental fees regularly. You collect deposits and advances to ensure your property is safe from unwanted damage. You can have an apartment where you find paying tenants to occupy. Arrange for a debit payment or post-dated checks to have the peace of mind that you get paid without any issues.

Because residential buildings earn less than commercial properties, the profit potential per lease is lower. Tenants who cause difficulties – While most renters are responsible and considerate, a small percentage of them generate problems. The home you’re living in at the moment is likely a residential real estate investment. If you have had it for years now, it’s likely priced higher today.

Industrial

Industrial business owners normally rent storage and warehouses. This is the type of commercial estate where goods are manufactured and packed. This is where people are creating the products sent out for retail selling. Some industrial leases include open lands, farm lots, and vacant properties. The property is used for livestock and domesticated animal farming.

Not only will you receive regular cash flow and larger returns from industrial real estate investment, but you will also be able to pay off your loans sooner than you would with residential real estate investment returns.

Commercial

This is the type of real estate where commercial buildings are leased for use as offices, shops, and bazaars. The most famous commercial real estate is housing and condominium unit development. Brokers then sell the units individually. The income of commercial real estate owners and business entities is the highest among all three as the investment is also as high. Landlords that engage in commercial properties typically make greater investments. If things don’t go as planned, they could lose a lot of money.

Most millionaires and successful people have reached the top of their game because of real estate. Real estate development is one of the fastest ways of generating income – both active and passive income at that. If the value rises over time, it can be a wise long-term investment. You may even incorporate it into your entire wealth-building strategy. You must, however, ensure that you are prepared for the risks.

If you’re looking to get started, you can get into Shorefront Investments’ buyers list! We’re Florida-based real estate investors looking to buy and sell properties fast. Looking to sell a property quickly by cash instead? You can give us a call at (850) 713-4866, send us an email, or fill a form on our front page!