Real estate is a popular investment strategy. It produces an income, but it can take time and a lot of active work. Managing real estate usually means being a landlord and dealing directly with renters. There are a few options, though, for passive real estate investing.
Passive real estate investing strategies are ways to have real estate investments without taking an active part in property management. Passive investors do not have to invest much time into their real estate investments, so they have that time to invest in other aspects of their lives.
Passive real estate investing includes Real Estate Investment Trusts (REITs), turnkey rental properties, real estate crowdfunding, and hard money lending. REITs invest in real estate by purchasing properties to add to their portfolios. They pay out a minimum of 90% to shareholders, but some pay out all of their taxable income. Turnkey rental property investments are homes that are purchased that don’t need any repairs or updates. An individual simply buys it and then begins renting it out immediately. It’s smart to hire a management company that can handle the daily tasks involved in managing a rental property. It does cost money, but the investor will spend less time and stress on the rental. Crowdfunding is when a company allows individuals to pool together their money in order to purchase a larger investment. This could be apartment buildings, office complexes, farmland, and more. Usually, individual investors pay a management fee and do not get a return on their investment for quite some time. Finally, hard money lending allows someone with money but no time to get involved in passive real estate investing by allowing others to borrow money from them. This involves lending money to people who may renovate and flip homes. Hard money lenders can charge high-interest rates on the loans given. A hard money lender will need borrowers who have been successful in real estate so far. If the borrower is not successful in the endeavor, they may end up defaulting on the loan.
Real estate investing does have its ups and downs. Real estate investing can take time to pay off and can also involve higher taxes to pay. However, it can also be easy to get started without a lot of money upfront. Passive investing requires less time, but still produces an income. Real estate investments are also safer than some other investments because of the physical asset.