In this blog post we are going to cover 6 passive real estate investing strategies.
Passive income is money that doesn't take much time or effort to make and you don't earn it from a traditional job.
Watch the video below to see the 6 strategies:
These are the 6 strategies:
1. Rental Real Estate
2. Vacation Rental Properties: VRBO/Airbnb
3. Lending/Buying Notes
4. Renting Vacant Spaces - Neighbor.com
5. Selling on Contract
6. Lease Option
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Passive real estate investing strategies. We're gonna talk about the six strategies that can help you make some serious cash flow.
Alright, guys. Let's talk about this. Cash flow through real estate. The first thing that comes to mind for most people as we talk about this is rental real estate.
As we talk about rental real estate, this is simply buying a property, a house, a duplex, a fourplex, renting that out, and making some passive income. The difference between your expenses and the difference between what you're getting paid by the tenant equals your cash flow. Now couple things to keep in mind. Typically, this goes up over time.
It's really small if it's anything at first. But as rents go up, as property values go up, and you're also making money through property values going up, through the tenant paying down your mortgage, through some tax incentives. So there's multiple ways there, but that's one of the ways is to get rental income. The next one I wanna talk about about is your VRBO or vacation rental Airbnb.
Those are different ways that you can rent out the property on a vacation basis. Now this is a different type of a model because you're really running a business rather than doing a rental property because you're in the experience business. You're trying to give people a great experience. You're trying to get great reviews, and you're trying to get them to promote that by leaving reviews to other people so that they'll come back and they'll actually book that place again.
Now the downside to something like this is you've got to have a cleaning crew. You've gotta have somebody that's doing the sheets. You have the bedding, all those different types of things, and you've gotta provide a furnished place as well. Now there's pros and there's cons to that.
You're getting a lot more money on a per night basis, but you're also having to deal with the management and the maintenance with people that are coming and going all the time, making sure they're getting in, making sure they're getting out. Yes. There may be some people you can hire out to do that, but that's the trade off. You're dealing with something where you're having to fully furnish it, and you've got to make sure the TV is working, there is a TV, those types of things.
When it comes to the Airbnb or VRBO.
The ideal with that is you're getting more money for the property because you're renting it on a nightly basis and fully furnished to somebody that's doing it on a temporary basis rather than somebody that's doing more of a long term rental situation. So some pros and cons there.
The next one I wanna talk about is simply lending or purchasing notes.
So one of the things I can do is I can take my money and I can lend my money out on a piece of real estate and I can have somebody pay me. That could be a short term note or it could be a long term note. Part of that is I can also go buy notes that are already created. A note basically meaning a promise to pay, a promissory note where somebody says, yes.
I'll pay you. Now there could be somebody that has done a loan on a property at a certain interest rate, but wants to get their money out, and they're willing to take a discount and I can go and buy that and then I can take the cash flow that's coming from that note. It's gonna depend on two things. It's gonna depend on the interest rate that that note was written at, and it's also gonna depend on what's called the discount rate.
The discount rate is how much I'm buying it versus what the note value is which will increase my overall margin on the property. So the other thing we can do is just simply hard money lending where I can take my money and I can lend it on a property and then when that person gets done I can make a return on my money which is typically shorter term and higher interest is what you're looking at when you're dealing with hard money lending.
Alright. Number four.
This is a technique that I just picked up recently, and this is how to maximize some of your properties. And there's a service called neighbor dot com.
Basically what they do is they rent vacant space. So let's say you've got a place for a that a trailer could go on your house, but you're not using it. You could rent this to somebody where they could put their trailer there and they could pay a hundred dollars a month or whatever the going rates are for something like that. The cool thing about this is I like to combine neighbor with my long term rentals. So for example, on the last property that we rented up, we said, hey. This is the price for the house, but this RV parking is excluded because we're going to be renting that to somebody else.
So with this, the house is seventeen hundred dollars and the RV parking is a hundred and fifty dollars. And so the guy said, you know what? I want the RV parking. I'll pay the extra hundred and fifty.
So then we've got eighteen fifty now. So we're getting more money because we're getting more than just what the rents are. We're getting the money for the RV parking as well. Now on neighbor dot com, you can actually rent out, different storage stuff.
You can save this room. You could store stuff in. You could rent out a vacant basement that's an unfinished basement and say, hey, you can put your stuff here, store your stuff there. But neighbor is more about a storage type situation, where you can have access to that and it could be storing a boat, a car, it could be space in a garage, whatever the case is is a great way to get some additional cash flow.
Another one that I want to talk about is actually selling on contract.
Similar to being the lender, what you're actually doing is you're buying a property, you're fixing that property up, and then you're selling it, but you're keeping the paper, which basically means they're paying you. Now you may have bought the property at a really good price and done the fix ups, and they're giving a decent down payment, and then they're making payments to you, and you're doing that on, like a thirty year amortization with the note having to be due in four or five years, something like that.
You also can be doing this with what's called an all inclusive, where you can wrap around you can take that property subject to. You can wrap around your loan and then do seller financing to somebody, that's that's going through an all inclusive, which means there's already an existing loan plus there's your loan that's in a secondary position. Now there's a lot more to be said on this. This is more of an overview, but I wanted to give you these things so you could start getting familiar with them. And the last one that I wanna talk about is just the lease option.
I've done a lot of lease options. The idea with lease option is you find a property and you rent it, but that person wants to buy the property. And so there's a price that they can actually buy the property for. Now the downside to this is if I give them today's price, let's say it's worth three hundred thousand and they buy it five years from now and the property's worth five hundred thousand, I just lost out on two hundred thousand dollars of value that I maybe would have get gotten.
The plus side of that is the person should be taking care of the property and should be responsible for any of the repairs or maintenance that needs to be done to the property. So I'm not doing any maintenance or putting any additional costs to that. Now one of the things that I like to do is I like to not set a purchase price. I like to say that the purchase price will be the appraised value less ten percent or five percent or something like that, but it has to have my ultimate approval so I get final approval on that.
So if I'm not happy with that price because what I'm not willing to do is I'm not get willing to give up appreciation, for somebody that wants to do that lease option. So it's something to take in mind. A lot of people will do that. You've gotta structure that deal properly in order for you to be making some serious money.
Alright. There you have it. The six ways to get passive real estate investing income.
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