You can earn passive income from many sources, including dividends from stocks, interest payments on bonds, ongoing revenue from passively managed businesses, even royalties on artwork. But real estate particularly excels at generating passive income, which says nothing of its tax advantages or diversification benefits.
Rental properties also typically appreciate in value over time. And speaking of cash flow, that usually improves over time, too, as rents rise but your investment property loan payment remains fixed.
Investors who don’t like the idea of renting to long-term tenants can instead rent their properties to short-term guests through platforms like Airbnb and VRBO.
They need a furnished unit and some flexibility to extend their lease term if needed. And they pay high rents, usually covered by their employer.
The idea is simple: The rent from the extra unit covers most or all of your mortgages, and you get to live for free.
Some property owners offer their parking spaces for rent in urban or denser suburban neighborhoods. They can make great money doing it, too, with no toilets to maintain or tenant headaches.
This umbrella category includes residential properties with five or more units, office space, retail space, restaurant and bar buildings, industrial properties, and mixed-use buildings. Investors can go as small as a local coffee shop or as large as a skyscraper.
If all that sounds like a lot of work, consider simply buying a share in a real estate investment trust (REIT). These companies trade on public stock exchanges so investors can buy and sell shares instantly.
Some hard money lenders raise money for their loans from the public. They issue short-term loans to house flippers to buy and renovate properties and charge high interest rates on them.
You don’t have to go through a crowdfunding platform to lend money to real estate investors. If you know a successful investor personally, you can issue your own private investment property loan.