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How To Earn Residual Income By Investing In Real Estate

by | Jul 2, 2019

Side hustle, passive income, residual income, everyone seems to be looking for ways to make money outside of their regular day job these days. For many, being able to earn an income outside of their regular business hours seems like an unattainable dream. It can be time-consuming and, with the already limited amount of time we get to spend with our friends and family, who would want to sacrifice these precious hours? However, there are ways you could earn some extra cash without the loss of much-needed quality time. 

Real estate is one of the topics that often comes up when someone brings up the subject of receiving a paycheck at the end of the month without (or almost without) having to lift a finger. If you think that you need to be a billionaire in order to invest in real estate, you would be mistaken. If you have always wondered about how someone can earn a residual income by investing in real estate, here is everything you need to know! 

1. Purchase An Investment Property

Directly buying an investment property is a simple way to invest in real estate. There are different situations when a building can be considered an investment. Some investors like to buy commercial or residential properties (such as a multi-family) where tenants pay a monthly rent. Once the building expenses and mortgage are paid off, the investor gets to keep what is left. Others prefer flipping properties: after buying a house in bad condition, they renovate it and sell it for a profit. Although purchasing an investment property directly is a relatively straightforward process, it requires time and a significant amount of money upfront. 

2. Invest In A Real Estate Investment Fund (REIT)

In 1960, Congress passed a law allowing the creation of large portfolios of income-producing real estate investments similar to mutual funds. The diversity of the investment portfolio helps mitigate the risks, and investors receive 90% of the REIT’s earnings. These investment funds can be public (traded or non-traded) or private.  Exchange-traded REITs are sold openly on the stock market. They are more liquid than their counterpart, but also tend to bring in less. Non-traded REITs are currently the most popular REITs. They usually bring in higher dividends, but they also often charge potential investors hefty upfront fees. 

3. Become Part Of A Private Equity Fund

Local real estate experts in tune with the trends often manage private equity funds in tune. They are funded by several individual investors: the more investors join in, the more diverse their portfolio can grow. However, most of these private equity funds target primarily high net worth individuals and institutional investors. 

4. Invest In One OF The New Crowdfunding Platforms

Real estate crowdfunding platforms are the latest trend in real estate investing thanks to a combination of developing technology and new federal regulations. They allow the private market to invest in real estate and offer minimum investment quotas that are often significantly lower than the ones required by private equity funds. The most popular ones are Rich Uncles (minimum investment: $5), Fundrise (minimum investment: $500), Realty Mogul (minimum investment: $1000) and stREItwise (minimum investment: $1000). Some of these platforms require their investors to be worth a particular total net worth. 

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