If you’re like most investors, you’re constantly on the hunt for new passive income methods. And, who wouldn’t be? Make money while doing virtually nothing besides fronting a reasonable amount of cash? Sign us up! Keep reading to learn the top three real estate investments that generate passive income and how you can get started.
The best part about short-term rentals is that you can charge more per night than with longer-term contracts. You also don’t have to worry about wasting your time chasing down rent payments, as these payments will be made upfront. When you use a property management platform or group, they’ll do the heavy lifting for you, such as letting the guests into the unit, handling the cleaning and maintenance, and dealing with guest emergencies so you can sit back and collect your cash.
Suppose you live in a big city with several tourist attractions, professional sports teams, national parks, the beach, or other popular draws. In that case, short-term rentals are a no-brainer as there are already several reasons people would want to visit your area and book their stay with you.
Did you know that the average Airbnb property generates around $925 each month? That’s pretty sweet for a passive investment. You can even place a minimum number of nights that guests must book with you, such as a three-night minimum, to ensure that’ll significantly contribute to your passive income strategy.
Suppose you don’t have the capital to buy an entire condo, house, or apartment unit, or you want to dip your toes into the short-term rental pond. In that case, you can start by renting a room in your house or apartment to get a feel for short-term rental hosting and see if it’s something you want to explore further.
Fractional Real Estate
Fractional real estate investing is among the most popular methods of passive income investing. Investors participate in a group that pools their capital to buy real estate. This method of investing mainly relies on social media platforms to connect and reach investors.
In another aspect similar to real estate investment trusts, people opt for fractional real estate investing because it does not require that much capital upfront—generally around $1,000 or less to get started. But, when you compare that to the potentially hundreds of thousands of dollars needed to invest in traditional real estate, it’s a pretty low barrier to entry, making it among the most desirable investments that generate passive income.
Investing in fractional real estate allows you to invest in properties directly, which gives you the freedom to choose which ones you’d like to invest in. Fractional real estate is an excellent way for investors to minimize their risk while diversifying and expanding their investment portfolios.
People who invest in real estate syndications purchase specific pieces of property and, in turn, are granted ownership of the asset. There are no funds involved in real estate syndication investing. The ownership they are granted gives the investor more chances to reap additional tax benefits while still investing passively.
Multiple investors pool their capital to buy real estate assets in a syndication. Once the funds are in, the syndicator will do the following:
- Find a suitable real estate deal.
- Handle all coordination and details of financing the transaction.
- Manage the investment once everything has gone through, allowing the investors to collect money passively.
Like investing in real estate investment trusts and fractional real estate, real estate syndication investors also don’t need to worry about property management, accounting and finances, maintenance, and other tenant issues.
The biggest obstacle to investing in a real estate syndicate is the high barrier to entry. On average, the minimum required investment is usually $25,000. Additionally, most syndications are regulated by the United States Securities and Exchange Commission (SEC), limiting how these offerings can be marketed to the public.
This level of intensified regulation can make it hard for outsiders to find real estate syndication opportunities to invest in if they don’t have an existing relationship with a syndicate or know someone who does. Knowledge of the real estate market—commercial real estate, in particular—is assumed; many of these options are not beginner-friendly.
Last but not least, online platforms for syndication deals may not be pre-vetted, meaning that the onus is on the investor to conduct research and take on additional risk for each deal.
Generate passive income now
Are you ready to get started with these investments that generate passive income? Are you feeling inspired by these methods of passive income? Ark7 can help. Start buying real estate shares and earning passive monthly income—all without the hassle of property management and all from one simple and easy-to-use app. Sign up today to start investing.