What are the passive real estate investment options to increase your net worth?

Guest post

Experienced investors consider real estate as an alternative and practical resource for making profits compared to stocks and bonds. Though most people haven’t explored real estate investment prospects yet, it’s gradually becoming popular among new investors due to several digital platforms. These platforms are making real estate investing more accessible to consumers. 

The new investors are especially putting their interest in passive real estate investments. Passive real estate investing is focused on investing in the real estate sector without significant investor involvement or active participation.

Why do you need passive income from an investment?

Passive income is one of the best options to increase your net worth by earning extra money apart from your regular paycheck. You don’t have to work actively for it, and you may enjoy your life or spend your free time doing other activities. 

Here are the benefits of earning passive income from investment:

• Increase your net worth, aka, building funds for your future
• Support kid’s education
• Pay off your debts
• Create emergency funds to deal with the sudden money crisis
• Achieve financial freedom

If you want to increase your net worth from healthy returns on investment, you should choose a passive real estate investing option. If you wish, you may seek assistance from a professional company that can offer you multiple real estate funds’ investment options. So, don’t waste time and explore those options.

So, what are we waiting for? Let us take a closer look.

REITs

REITs (Real Estate Investment Trusts) are similar to mutual funds, which invest exclusively in real estate. Through REITs, new investors may invest in large real estate deals without the high barrier to entry. REITs include a vast range of properties in their portfolio at once. Investors can purchase and sell shares of REIT whenever they need to. REITs do not develop properties, instead of buying real estate into their portfolio and deals with them to generate profit.

There are three types of REITs:

• Exchange-traded or Publicly-traded REIT – These are registered with the SEC (Securities and Exchange Commission) and listed on exchanges like the NYSE.
• Non-publicly-traded REIT – Though registered with the SEC, these REITs do not trade publicly. 
• Private REIT – Normally offered to institutional investors, neither registered with the SEC nor traded on exchanges.

 

A REIT can buy large apartment complexes in big cities and build value for its shareholders while managing the individual properties and tenants. New investors can buy shares in REITs through exchanges, stocks, and funds. To learn more about how REITs are different from real estate funds, read what is a better real estate investment.

Crowdfunding

Real estate crowdfunding offers retail investors to invest funds in real estate deals with low entry points. These investors put their money into multi-million dollar real estate projects.

Real estate crowdfunding is typically managed via online platforms where you can decide which project to invest in. The most significant benefit of this option is you can start with a small investment. 

New investors may use the online marketplace and browse through various options. Being a new investor, when you find an investment that matches your requirements, you may invest your funds over there along with other investors. 

But remember, many real estate investors require locking in a time commitment for the investment. That’s why leaving crowdfunding is difficult at a moment’s notice.

Check out some great accounting tips for novice real estate investors here!

 

Hard money lending

Another passive real estate investment is hard money lending. You can carry the initial expenses or pay the down payment for a renovation / quick sale project in this option. Another entity, such as a flip seller, might handle the project.

Sometimes, professional fix-n-flip sellers handle multiple projects at a time. If they find a great deal but can not arrange the money due to financial issues, they would approach hard money lenders for financial help. Those lenders pay a reasonable amount to cover the sale. These loans are often shorter term and higher interest than conventional loans.

So, if you have some money in your savings, you may invest that in real estate investment as a hard money lender and potentially earn a decent profit in the form of interest.

Turnkey rental property investment

Investing in a turnkey rental property can be an option if you want to earn steady money without much hard work or interference. In this option, being a new investor can be a passive partner to someone doing all the hard work related to this deal. In this case, one needs to engage some funds to acquire the rental first. 

After that, a management company will come into the picture and handle all the responsibility of maintaining the rental property. On the other hand, the tenants will take care of the mortgage and increase the rental property’s equity.

This type of passive real estate investment is quite challenging as being an investor, and you might have little knowledge about how to deal with rentals and tenants. Read this article to learn about the difference between buying turn-key rental versus passive syndication investing.

 

Real estate ETFs

A real estate ETF is a collection of stocks in a single fund. ETFs are pretty similar to index funds and mutual funds.

The primary benefit of ETFs is low cost and diversification in investment assets. They are taxed as ordinary income though.

Real estate syndication

Syndication is when a group of investors gathers funds to buy large commercial real estate. Real estate syndication is the partnership between active investors (aka “general partners” or “sponsor”) and passive investors (aka “limited partners”). By using their money, skills, knowledge, and resources, general partners buy and manage a property or create a fund that invests in such projects.

It is up to you to decide whether to participate in real estate syndications, which are typically geared either towards providing you with passive income or helping you to increase your net worth or sometimes both. The sponsor will search and underwrite hundreds of properties to find the best one for investing. Under the guidance of professional real estate sponsors or fund managers, you may avoid property management hassles and unexpected calls from tenants by investing with the experts. Syndications typically offer tremendous tax benefits as well. 

Endnote

These are some of the passive real estate investment options that can potentially help you increase your net worth. But before choosing any option, you must review your financial status, the amount of your savings, educate yourself on the investment option of your choosing, and assess the risk-taking ability. After considering such factors, you should choose an option that is best for you. Good luck with your investing journey!

This is a guest post by Patricia Sanders. Patricia Sanders is a financial content writer and a regular contributor to debtconsolidationcare.com. Besides writing, she loves to eat, travel, and read various books. You can reach her at facebook.com/SsandersPatricia10/.

 

Have you thought about passively building your wealth via real estate investing?

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