Passive income is the modern gateway to affluence and financial comfort. It can significantly improve someone’s quality of life and allow them to reinvest their funds in the future. But what do we mean by passive income in real estate? And how is it earned?
What is passive income?
Passive income is when you can earn funds without having to trade your time physically for it, as opposed to an active income that you would earn through a normal job. Passive income is any income gained without active, ongoing involvement.
Even though passive income does not require full-time involvement, it requires a lot of upfront work to set everything in place. However, once all the necessary elements are set in place, you will no longer need to participate in the process.
A passive income can help improve your life immensely in the following ways:
- Help you fund your retirement plan
- Assist paying your loans and other financial obligations
- Grow your savings fund
- Eventually (and hopefully), replace your active income
How can you earn passive income in real estate?
Rental income: Let’s start with the most popular method of earning a passive income – rental property. It is most people’s dream to be able to purchase a property that they will eventually earn money from. There are two types of properties that you can invest in:
- Residential rental property
- Commercial rental property
Investors can opt to purchase properties for long-term or short-term rentals. In the recent years, short-term rental became extremely popular since services like Airbnb became most people’s options when traveling either for business or leisure. There are plenty of residential properties to choose from, such as:
- Apartments – Studios, One-Bedroom or larger apartments
- Single-Family rentals
- Apartment blocks
Another profitable property option is commercial property. The rent price of office spaces is usually higher than that of residential property.
REITs (Real estate investment trusts) have become a popular alternative rather than buying a property directly. REITs are publicly or privately traded funds where investors pool their money in order to invest in a profitable property that they will eventually earn significant returns.
REITs are sold like company shares, which means those who invest in them receive regular dividends. It’s important to remember that dividends are subject to capital gains tax since they are a form of income, but at the same time, they are still a valuable tool when building a diversified real estate investment portfolio.
Real Estate Crowdfunding
Crowdfunding platforms that involve real estate investing are fairly new and are more commonly used by accredited investors. Similarly to REITs, a group of investors will pool their funds together to create a substantially sized investment and then usually hire a third-party to manage the property.
Returns from crowdfunding tend to vary based on the specific instruments that you choose for trading. Real estate crowdfunding tends to use the internet and social media platforms in order to reach potential investors. Crowdfunding offers investors access to capital they might have not been able to raise otherwise.
What’s important to remember when investing in real estate?
While investing in real estate can be extremely lucrative and rewarding, it’s a challenging field that requires sufficient research and commitment. Seasoned investors will study a potential investment to clarify several essential points:
- Location – whether you are buying a property or investing in a fund that will purchase one, it’s crucial to seek out opportunities in the market that you can gain from.
- Research – it’s important for investors to filter through opportunities and pick the one that suits them and their investing goals best.
- Analyze – Investors must have a clear understanding of the kind of goals they have and what return they’re aiming to have.
But what is one golden method we did not list above?
You got it: real estate affiliate marketing. Affiliate marketing is an easy way to earn a passive income if you are able to drive traffic to your site and offer click-throughs for those with their backlinks and banners on your site. Affiliate marketing is a fairly easy industry to enter, as it does not require any specific in-depth knowledge.
Affiliate marketing is one of those businesses that allows marketers to be their own boss and work independently. It requires you to create a blog or website based on a certain niche where you will generate content that will attract a relevant audience.
Often successful content creators graduate to become affiliate marketers once they’ve created a successful website or portal that generates plenty of traffic. Such websites can connect with brands and can convert their traffic into dedicated customers. But how does one connect with excellent affiliate marketing programs in the world of real estate?
For example, companies like Real Estate Affiliates allow their partners to partake in multiply affiliate programs, such as CPA (Cost Per Action), CPL (Cost Per Lead), and the ultimate affiliate method Rev Share (Revenue Share). Affiliate marketers can benefit from such programs depending on which method they see best fits their website.
Investing in real estate is a tough one – buying property is expensive and requires significant knowledge and understanding of the current real estate market of your region. This is why alternative opportunities to earn passive income have come into existence. REITs and crowdfunding require little initial investment and could have fairly lucrative results.
Regardless, affiliate marketing is definitely the forerunner when it comes to the minimal investment = maximum result formula. Since affiliate marketing is not limited to a single industry, it contains opportunities that could benefit even the most unsavvy marketer seeking to benefit from their website.