With enough passive income, working becomes optional because you can pay your bills with the income from your investments. Too many investors concéntrate on bonds and dividends from stocks and ignore real estate.
Sources of Income From Real Estate
Real estate is not only an income-oriented investment, but it’s also a less volatile asset than stock, so even as you create multiple streams of passive income from real estate you can also reduce risk in your portfolio without sacrificing returns.
Here are ways you can invest in real estate:
When most investors think of investing in real estate, they jump straight to real estate investment trusts (REITs) for good reasons.
You can buy REITs easily through your regular brokerage account, IRA, 401(k), or another retirement account.
Because they’re publicly traded, they’re under SEC rules, that say they must pay out at least 90% of their profits in the form of dividends, and they offer high liquidity, allowing you to buy and sell instantly, And they make diversification easy.
Even though many real estate crowdfunding websites still only accept money from accredited investors, these services have increasingly opened their doors to middle-class investors. That means investors can get started with less than $1,000.
3. Rental Properties
When you buy a rental property, you can predict the cash flow, or ROI, with great accuracy. Not many investments offer such predictable returns. When you can predict the return of any given property, you can buy nothing but good investments.
4. Flipping Houses
This is is the only option on this list that doesn’t only involve creating passive income. Flipping properties requires a lot of work, but in return, you can expect extraordinarily high cash-on-cash returns. And as with rental returns, experienced investors can predict these returns accurately.
You know your purchase price and closing costs, so all you need to forecast are your renovation and carrying costs. Flippers get into trouble if they underestimate these costs and fail to budget for unexpected repairs.
5. House Hacking
The idea behind house hacking is to bring in other people to pay your mortgage for you. In the classic model, you buy a multifamily property, move into one unit, and rent out the other unit or units.
If multifamily housing doesn’t appeal to you, there are other strategies that go from roommates to accessory dwelling units, to foreign exchange students, ore ven Airbnb.