Many people actively look for a passive revenue stream. They can do so either online or in person, as both methods have merit. Real estate can be a powerful catalyst for passive income, as there are numerous ways to make money.
Rental Income As Passive Revenue
The most straightforward way to make money with real estate is by renting out property. Those with capital to invest can buy houses or apartments and rent them to tenants. Depending on one’s location, contractual agreements can run from one month to multiple years. Unless contractually specified, a landlord wouldn’t be able to adjust the renting costs during that agreement.
However, property owners must consider a few factors that may impact the passive revenue stream. For instance, tenants may be late on payments, things may break, or inflation may occur. Those all need to be accounted for when making real estate profitable through rental income.
Many people firmly believe their property will appreciate over time. It is common for houses or apartments to rise in value. After all, there are only so many buildings to place in any city or town. In addition, local municipalities may introduce a “building stop” to prioritize new venues or preserve greenery. That may drive up property prices, as there is never a shortage of people looking for a home.
However, the value of a house or apartment depends on the state of the real estate property. Run-down locations or places with issues will depreciate. That is counterproductive when building a portfolio with passive income opportunities. Those shouldn’t be major issues if one takes care of their property and the tenants behave properly. As a result, it leads to a more accessible passive revenue stream for many.
Lower Upfront Capital Requirement
Acquiring real estate is often possible through a mortgage. People will borrow money from the bank or another financial institution by putting up a small amount as collateral. Therefore, investors control a high-value asset with a small investment, maximizing their potential returns. That can prove helpful when trying to flip properties for quick profit or even using it to generate rental income. Those earnings can help pay off the mortgage and generate a passive revenue stream if there’s some money left over.
In times of financial crisis, however, obtaining a mortgage may prove complicated. Banks become less eager to extend credit to anyone who asks for it. In addition, the interest rates on repaying the loan – borrowing money costs money – can become unfavorable. That shouldn’t deter people from owning real estate, as the long-term prospects are usually favorable.
Airbnb And Other Sharing Options
A somewhat more modern option is the exploration of estate-sharing, of sorts, Platforms like Airbnb make it easier for real estate owners to advertise their location as a “getaway spot”. It is different from traditional renting due to much shorter agreements. However, the property owner can charge a much higher fee, as people will pay a premium for finding a house or apartment rather than booking a hotel.
As there may be multiple renters per year, taking care of the property becomes more essential. One cannot afford to let things break down or be in a less-than-optimal state, as it will turn off potential prospects. Generating passive revenue is still possible through Airbnb, although it may require a bit more upkeep than traditional renting. Even so, a valid option to explore.