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How To Passively Invest In Real Estate

How To Passively Invest In Real Estate

Are you interested in learning how to passively invest in real estate? If so, you’ve come to the right place!

2021 has been a tumultuous year for the economy, and the real estate market, but despite the ups and downs, the reality is that real estate investing is still one of the best ways to generate passive income.

In this article, we will provide you with several strategies that you can use for earning passive income from real estate investing.

Real Estate Investment Trust – The Easy Way To Passively Invest In Real Estate

One of the easiest ways to earn passive income through real estate investing is by investing in a Real Estate Investment Trust (REIT).

With a real estate investment trust, you will invest your money into the trust with other investors. That money will then be directed towards investing in real estate and it will ultimately provide you with a return on your investment from a dividend on a quarterly or annual basis.

The great thing about investing in a Real Estate Investment trust is that you don’t actually have to concern yourself with managing any of the properties yourself because of the simple fact that the REIT is responsible for managing those properties and all you have to do is collect your dividend.

Some of the most popular Real Estate investment trusts in 2020 include:

  • QTS Realty Trust (ticker: QTS)
  • Equinix (EQIX)
  • Digital Realty Trust (DLR)
  • American Tower Corp. ( AMT)
  • SBA Communications (SBAC)
  • Prologis (PLD)
  • Public Storage (PSA)
  • Extra Space Storage (EXR)

Tips For Investing In A Real Estate Investment Trust

As I mentioned at the beginning of this article, we’ve been through a tumultuous year in 2020 and the economy is certainly not like it was one year ago.

The key to success with investing in a real estate investment trust is to make sure that you do your due diligence and analyze the Real Estate Investment Trust carefully.

When analyzing a REIT, you want to find out specifically what sector they are invested in. For example, are they investing in apartments, retail, Healthcare, lodging, data centers or shopping malls?

Obviously, you don’t want to invest your money in a REIT that’s heavily invested in a sector which has been hit hard during the pandemic. For example, movie theaters, restaurants and shopping malls have all been hit hard during Covid-19 so it’s best to thoroughly analyze a Real Estate Investment Trust before you invest your hard-earned money with them.

Besides confirming the sector that the Real Estate Investment Trust is currently invested in, the next thing that you want to do is analyze how it’s doing financially.

This can be done by reviewing the REIT income statement, funds from operations, and growth in FFO or AFFO,

Invest In Mortgage Notes

Another great way to earn passive income through real estate investing is to invest in mortgage notes.

What are mortgage notes? They are essentially promissory notes, or legal documents, from borrowers that are issued along with the mortgage. These IOU’s are often sold by a lender when they need to generate capital.

Notes an excellent way for an investor to generate passive income because, once the investor purchases the note, they essentially “become the bank” and the borrower has to pay their monthly mortgage payment to the investor.

Thankfully, besides purchasing notes from banks directly, there are a wide variety of different places to purchase notes including marketplaces, exchanges, hedge funds, private equity funds, credit unions, and more!

As with any investment opportunity, the key to success is to do your due diligence and thoroughly research a note, before you decide to purchase it.

Multifamily Properties – A Smart Way To Passively Invest In Real Estate

Last of all, but most important, obviously my most favorite way to passively invest in real estate is to invest in multifamily properties, especially when you have a property management company managing those properties for you.

Multifamily properties are a great way to passively invest in real estate because of the simple fact that when you own an apartment complex, with multiple units, the more doors that property has, the more income that it’s going to generate.

Contrast this with owning a single-family home, which only provides you with one source of income every month. When that single-family home is vacant, you’re not earning passive income because your property manager is going to have to list that property on the rental market and get it rented once again.

With a multi-family property, when you have one vacancy, you can always count on that property continuing to generate multiple streams of income for you on a monthly basis so that you’re still going to have money coming in even while your property may have one or more vacancies.

Remember to do your due diligence before investing in a multi-family property. This includes looking over the rent rolls, bills, and other expenses for the property. This is going to save you the time, money and hassle of investing in a multi-family property that’s going to be more of a headache than what it’s worth.

Besides doing your due diligence, you should also hire a property management company immediately after you purchase the property because this will help you to take yourself out of the equation and save you the time and hassle having to manage that property and be involved in all the day-to-day management duties for that property.  

Contact Blackbird Realty 

Do you own and manage single family or multifamily properties in Las Vegas? If so, let us save you the time, money and hassle of managing those properties yourself.

To learn more about the services that we can offer you, or for a property management quote, contact us today by calling (702) 903-3556 or click here!