8 Genius Ways to Make Real Estate Passive Income

Real Estate Passive Income

Passive investing is one of the most common strategies to increase your income, grow your investment portfolio, and build healthy savings for the future. Done well, it won’t have to consume much of your time and energy. Real estate is an excellent option to build passive income streams. However, there is an added risk. As a result, this strategy is not for all investors. Deciding whether or not to invest in passive income assets can be made easier with a financial advisor.

What is real estate passive income?

Whether you’re looking early retirement or simply want a more secure financial situation, building sources of passive income can be key. In a nutshell, passive income is a strategy that allows investors to generate income without ongoing, active participation.

Investors can use various real estate options to generate this passive income. Some may purchase and manage rental housing, while others may choose to invest in commercial property.

Why Passive Income Matters

No matter your career, your income is inevitably limited by time. Whether you work for a salary, earn an hourly wage, or even have a side hustle making extra money, you will eventually run out of hours in the day where you can generate more income. And that’s not to mention the toll that uninterrupted work would take on your mental, emotional, and domestic health.

Passive income changes that. While the actual level of participation will vary from investment to investment, the idea is that once your real estate investments are established, they can generate income on their own. Essentially, you can earn money while you work from 9 to 5, while you sleep, and even while you’re on vacation with your family.

These passively earned funds can be used to boost your savings accounts, pay the debtsave for your children’s college, achieve financial independence or even provide income throughout your retirement.

Types of Real Estate Passive Income

There are many different avenues to choose from when considering passive income real estate investments. The one you should choose will depend on your level of experience, your availability Cash Flow and the time you can afford to spend on your investment. Here are some real estate investment options to consider.

Single Family Home (SFH)

A single family home, or SFH, is an individual, stand-alone rental property, such as a house or even a condominium unit. These properties can be purchased and then rented out to a single tenant, a couple, or even a family. This provides long-term asset growth and, in many cases, additional monthly income.

An SFH is one of the most common options for real estate investment. However, they can also be risky, as turnover and vacancies equate to lost revenue for owners.

Multifamily units

Another option for rental property is the multifamily unit, such as a duplex, triplex, or quadruple. These units allow you to generate income from multiple tenants while only managing one physical property.

This may be easier somehow (a mortgage, a property tax bill, etc.), and generates more income than a single-family property. It also allows you to spread the risk of a vacancy across multiple units, cushioning the financial impact. However, it also means managing multiple potential leases, tenants, and vacancies at the same time.

Apartment building

If you are looking for a larger passive income ladder, Apartment building — including properties with five or more units — can meet your needs. The same as multifamily propertiesThese investment properties can be somewhat simplified and increase the earning potential of passive income.

However, apartment buildings also require a much more complicated management process; You may want to hire a property manager to find tenants, collect rent, and facilitate repairs, all of which can affect your income.

Storage Units/Facilities

Both urban and rural communities can benefit from storage unit facilities, which are in demand in almost all populated areas of the country. With multiple units and relatively low overhead, storage facilities can be a great way to build passive income.

Your income will depend on the number of units you own, as well as factors like climate control and customer access. You may need to consider property management, security, and insurance costs.

Holiday homes

Real Estate Passive Income

Real Estate Passive Income

A vacation property it can be a fun and lucrative option to generate passive income. These properties can be purchased in areas that you and your family already enjoy visiting, allowing you to use the home certain weeks of the year and rent it the rest of the time. In some cases, you can pay for yourself, your vacation there, and then some. Costs include the usual home ownership expenses (repairs, updates, insurance, etc.) as well as management fees, rental platform fees and housekeeping services.

You will also need to take into account tourism trends and seasonal vacancies.


If you are looking for an extremely passive, hands-off investment option, real estate investment companies (or REIT) may be the way to go. REITs are essentially companies that own real estate or hold mortgages on properties. When you invest in REITs, you buy shares of that property and benefit from the growth of the asset.

As the properties increase in value, so will your shares, which you will eventually be able to sell at a higher price. you can too receive dividends from their REITsProviding you with a passive income stream.

Commercial property

Depending on your available capital, you might consider purchasing a commercial building, an industrial complex, or even combined residential/commercial properties (mixed use). These generally require a much higher initial investment than residential properties. As such, they may be more suitable for investors with partners and/or significant available capital.

Commercial properties have the potential to generate stable passive income with long-term tenants. However, be sure to factor in longer vacancies and higher remodeling costs.

P2P loans

If you have the capital available, but don’t necessarily want to deal with the practical requirements of landlords or property flippers, from peer to peer Loans (P2P) could be worth it.

With P2P platforms, you can lend your capital to other real estate investors. This allows them to remodel, flip or rehab their own property with your funds. Your loan will then be repaid, with interest, giving you a passive return in a relatively short period of time.

How to invest in real estate

So, you know the most common types of passive real estate investments. Now, how do you start investing in real estate? There are three key steps you need to follow.

Know what you can afford

As with all investments, it is imperative that you first know what you can pay invest first. Yes, creating passive income streams is an important part of the path to financial freedom. However, you shouldn’t sacrifice your financial stability.

Spend some time considering your current cash flow and available funds. Can you afford to keep an investment in a worst-case scenario, such as a prolonged tenant vacancy or a major property repair?

Choose your level of participation

How passive do you want your real estate investment to be? If you want a completely independent process, consider investing in REITs or peer-to-peer lending platforms. If you don’t mind basic property management, it might be worth considering a single-family home.

Consider how much time you have to invest in your real estate business right now. Then choose a passive income approach that maximizes the return on your time.

Analyze Profitability

Some passive income investments are more profitable than others. Some can provide you with a passive income stream today, while others are more a long-term investment. What is more important for you?

Before you invest, look at the numbers to determine the return on your investment. Be sure to consider your financial plans, retirement strategy, available cash reserves, and the time you want (and can) commit. In some cases, a less profitable investment may make more sense for your particular situation. Rather, you may have to wait a few years before seeing the true return on your passive real estate investment.

Bottom line

Real Estate Passive Income

Real Estate Passive Income

Passive income streams can help you create a sustainable financial plan that supports you through retirement and beyond. Real estate investments are a great option to generate that passive income and can be adapted to almost anyone’s situation. Regardless of how much time or capital you have to invest, you can find a real estate passive income option that fits. Passive income from real estate can bolster your savings, eliminate personal debt, and support a small business. Or, for many investors, it can simply ensure that life after retirement is as financially secure as possible.

investment tips

  • Consider work with a financial advisor real estate experience before investing. Finding a qualified financial advisor doesn’t have to be difficult. Free SmartAsset Tool connects you with up to three financial advisors serving your area, and you can interview their compatible advisors at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you reach your financial goals, start now.

  • Do you have a rough estimate of how much the property you want to buy will cost? If so, the mortgage calculator SmartAsset can help you figure out how much your loan will cost each month. Through this tool, you can integrate many other factors, such as an interest rate, Deposittype of loan, taxes and more.

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The charge Beginner’s Guide to Real Estate Passive Income first appeared in Smart Asset Blog.

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