Is real estate investing the path to riches? Not really. But it could help you build up a source of passive income. Provided you pull it off correctly.
You see, investing in real estate is trickier than it seems. Across the world, people invest in properties before they lay down money anywhere else. There’s a good chance you already know someone with a vast property portfolio. That’s because it’s one of the easiest investments to make and is generally considered a lot less volatile than say equity or bonds.
You may have wondered how much you could earn with a few properties of your own. If you walked into the local bank and signed yourself up for a massive mortgage, you could probably start buying tomorrow. Perhaps villas in the Mediterranean or student homes in a small college town that are rented out constantly for a healthy stream of income.
Here’s everything you need to know about creating passive income from real estate investments.
Define the Number
If you want to create a stream of passive income you will need to seek out yield. With real estate that usually means rents. Rental yield varies throughout the country, but most buy-to-let entrepreneurs seek yields that can beat the bank’s mortgage rate and the fixed savings rate. After all, if you’re going to manage a property rather than put money in the bank, you deserve to be compensated for your extra effort. So start by looking at locations that offer the best and most stable rental yield.
Keep the costs low
There’s a lot of costs involved in the traditional buy-and-hold investment strategy. Properties need maintenance and selling them is usually a slow and expensive process. Services like Quick Move Now have made it easier to sell properties quickly while cutting costs. However, costs such as property insurance, council taxes and regular repairs are simply unavoidable if you buy and rent out a property. Try to get some repairs done yourself and save money. Avoid property brokers and use online platforms to rent or sell the property. When you’re trying to create passive income from real estate, suppressing these costs is absolutely essential.
Keep Your Options Open
Buying a property directly isn’t the only way to get exposure to real estate. Real Estate Investment Trusts or REITs have sprung up in recent years that make the process a lot more streamlined for average investors. The REIT is a trust that holds a large number of properties and pays back a dividend every quarter from the rents gathered.
It is possible to create a healthy and stable stream of regular income from real estate. But like any other investment it requires patience, research and a little experience to successfully achieve the yield you need. Unlike other investments, property could be quite expensive to maintain so try to cut costs and boost income as much as you can. Real estate could be a vital part of a portfolio that promises financial freedom.