There are many ways to earn passive income, although real estate remains one of the most popular. Especially with the rise of fintech crowdfunding platforms across real estate sectors, companies like Yieldstreet believes there can be a variety of ways to earn truly passive income from real estate investments. While owning and renting out a property still generates rental income, tenants often change and maintenance work means that the income isn’t just rolling into your account without any work. Instead, institutions and the ultra-wealthy have been hunting for truly passive income from professionally managed real estate investments, and here are five tips to help retail investors earn the same hands-off benefits.
1. Assemble your team
To ensure you’re making sound investments, it helps to have a good team around you to field questions about taxes, liabilities, and the potential yields for your portfolio. Your roster may include a real estate agent, financial advisor, and attorney who are all familiar with the specific investment sector. Alternatively, you may opt for a crowdfunding platform like Yieldstreet, which uses its team to source and offer deals to investors.
2. Know Your Niche
Great, you want to invest in real estate. While you could find generic REITs, it helps to stop and ask yourself which niche markets you feel most comfortable investing in. Residential and commercial real estate perform differently, but that’s just the tip of the iceberg. Knowing which geographic region and the underlying collateral of the property should be crucial for any investor looking to perform due diligence.
Investors can also choose between REITs, real estate hedge funds, and real estate crowdfunding platforms to figure out which vehicle fits best with their risk appetite.
3. Are you an accredited investor?
For investors who fall under the new SEC’s definition of accredited investors, you may qualify for certain private securities and deals unavailable to the general public. Check the new criteria to see whether you’re able to invest in these types of deals.
4. Avoid money pits and high fees.
Whether it’s a property that eats up too much money, or a real estate hedge fund that eats up your expected returns with high fees, it’s important before any investment to speak with a financial advisor or understand the risk associated with an investment. While investors can chase high yields, it can oftentimes mean that investor principle isn’t backed by collateral.
5. Owning isn’t truly passive income from a real estate investment
While directly investing and owning can seem more direct, but often comes with a litany of other problems and prevents the income from truly being passive. When you’re beholden to renters and property upkeep, the income can stop becoming passive real quick.
