How to Invest in Real Estate & Create Passive Income

When it comes to creating passive income, there are a lot of different ways to go about it. But, one of the best ways is by investing in real estate.When it comes to creating passive income, there are a lot of different ways to go about it. Which means that your options are almost endless. But, one of the best ways I have found to create great passive income is by investing in real estate. I realize this can be a very scary endeavor, because if it was easy, everyone would be doing it. But creating passive income through real estate investing can really change your life.

Creating Passive Income

I’m pretty sure we all would like to live a life where we wake up in the morning excited for what the day holds. We don’t want for anything, because we have the financial means to take care of our needs and wants. All the while still using our skills to help others and contribute through a job/career, whether it be paid or not. This is the ultimate work/life balance and what I am certainly working to achieve.

So how can investing in real estate help with this? Well, when the due diligence is done thoroughly, real estate can bring in a good amount of passive income monthly. This passive income can help you live the life that you want, with minimal work over the long term.

However, don’t let the word passive confuse you. There is nothing ever really passive in real estate. Therefore, it’s a misnomer. No matter which type of real estate investor you choose to be, there will be some work involved. But, the amount of work required to create this passive income is much less than other streams of generating income. Plus, this income can sustain you for years to come, therefore it’s considered passive.

Types of Passive Income

Creating passive income can be done in many different ways. But some ways require less time to create the income than others, therefore creating a higher ROI (return on investment). These are the types of passive income I look for, since they give me more time to create the work/life balance with my family.

Some of the best ways to create passive income, besides investing in real estate, are:

  • Affiliate Marketing
  • Build an Online Store to sell things you find for a profit, or drop ship items
  • Create a YouTube Channel and monetize it with sponsorships/affiliates
  • Create Online Courses
  • Dividend Returns
  • Invest in a High Yield Savings Account
  • Rent out a room/rooms in your house
  • Sponsorships
  • Write Books (especially e-books because you don’t have the publication cost associated, so a higher potential ROI is possible)
  • Write a Blog and Monetize it through affiliates and/or sponsorships

The list can go on and on, but you get the idea. There are quite a few ways to create an income stream passively. But what most of them have in common is that they aren’t really passive. They either require some work to set them up and manage them, or they require regular work to keep the income stream coming. This is something to keep in mind and should help you determine which passive income stream path might be a good fit for you, based on the work involved, and the potential ROI.

Besides becoming a real estate investor, I have done, or am doing, five other things from this list. Some work out better for us than others, but I like the diversity of the work and the passive income streams.
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Types of Real Estate Investing

With regard to real estate investing, there are a few different ways this can be done. First and foremost, it is always best with investing in real estate to pick one avenue you really like and stick with it. This is due to the fact that the rules and regulations can vary widely from genre to genre. Learning one avenue, and succeeding at it, doesn’t necessarily translate across the board to other types of real estate investing.

The types of real estate investing include:

  • Buy and Hold SFH (Single Family Homes) – more work up front, but long term passive income
  • Buy and Hold Multiplexes (usually four units or more) – same as SFH, but harder to get funding
  • Commercial Buy and Hold – same as Multiplexes, but requires even more funding to get into
  • Crowdfunding – the most passive since you just invest your money into a crowdfunding pot, and then you own a percentage of a larger project, and reap the interest rewards
  • Fix and Flip – less work up front, much more while fixing, and then have to sell it for a profit
  • Land Investing – not long term income, but a lot of shorter term buying and selling
  • Peer-to-Peer Lending – one of the most passive since you are just lending money to other investors and collecting the interest monthly
  • Wholesaling – playing the middle man between a seller and buyer, which can be pretty intensive and there are a lot of rules to abide by, which can make it the most difficult

There are different investors for different financial goals, and different seasons of their life. As a couple with children who should be out of the house in the next ten or so years, buy and hold investing makes the most sense for us. It doesn’t require a ton of work once we get the properties, so the income is mostly passive. We can also hold the properties for as long as we want and continue to generate income from them for years to come. Therefore, we are buy and hold SFH real estate investors, which really suits our lifestyle and long term goals.

But, buy and hold properties (SFH or Multiplexes) do require a lot of work on the front end to make sure what you are purchasing will have the income generating power you desire. If you purchase the wrong property, in the wrong area, you could have just lost money instead. And that is opposite of our ultimate goal.

Investing in Real Estate

Overall, before you make any decisions, do your homework. The best place I have found to find the most in-depth information about investing in real estate is from Bigger Pockets. This site has:

  • articles
  • real estate tools
  • a podcast
  • a community board to ask any and all questions that you may ever have

It is by far, my favorite real estate investing tool and has helped me out a lot along the way.

Before you decide to jump into real estate investing head first, figure out what your ultimate goal is. How active in real estate do you want to be? How much time can you realistically give it and still create the balance you desire?

Once you figure out which type of real estate investor you want to be, then reach out to others who have done it successfully and pick their brain. We are a chatty bunch and love to pass along our knowledge to help others along their path to passive income. Fully utilizing the resources that are out there can only benefit you on your journey to investing in real estate, so use them. And enjoy the real estate passive income ride, because it can be a lot of fun!

How have you created passive income through investing in real estate?