One of the key things you need to be successful in investing is to have passive income. Generally speaking, passive income from real estate means that you earn profits every month without having to actively work for it. This extra income can help you grow your retirement savings or reinvest in other properties, allowing you to focus on other things, like your health and family.
There are many ways to earn passive income in real estate, but the most common ways are:
Rental Properties โ Generally, if you own a rental property, this can be classed as passive income, unless you are directly managing the property – for example, finding tenants, coordinating maintenance, repairs etc – then it becomes active income and an investment.
On the other hand, if you hire a professional real estate agent to manage your property, all the profits you make will be passive income.
Investors โ If you invest in a business or property that produces a profit and do not actively participate in it, this is considered passive income. Out-of-pocket interest โ It is possible for an investor to give a loan to a business or individual and then enter into a contract where interest is added to the loan. In that case, the income earned from the interest counts as passive income.
To build a great real estate portfolio, you need to find different avenues to earn passive income. But before you do, here are the most common mistakes to avoid when earning passive income with real estate:
Not doing enough research before investing in real estate Not having a diversified real estate portfolio to maximise passive income opportunities Investing in more properties than you can maintain or repair all at once if the need arises Micromanaging your agent with property maintenance, repairs, reporting etc.
When you're ready to earn passive income from real estate, the next step is to find the right property to invest in. Be sure to check out our list of commercial properties that offer investment opportunities that will bring you passive income.