Passive income investments can help you achieve greater financial security and stability. In many instances, the money you make can be earned with little to no additional work involved and can help you build your savings or retirement fund. Over time, if you pick the right opportunity, your passive income could even surpass your active and primary income.
Another one of the best passive income ideas for 2023 involves real estate investments. If you’re interested in passive real estate investing, there are several ways that you can go about it. You can make passive income through active rental properties or through investing in crowdfunding and real estate investment trusts (REITs). Learn more about these passive income investment opportunities below.
If you’re considering passive real estate investing, you’ve likely considered rental properties. Rental property investments typically fall under two categories: residential and commercial properties. Both of these property types generate passive income through monthly rent payments.
Basically, you lease a property to a tenant for an amount that exceeds the property’s expenses. The remaining amount is considered positive cash flow or passive income.
While rental properties make up some of the best passive income opportunities, they do require substantial investment upfront in most cases. Nevertheless, there are some passive income investments in real estate that are more affordable options. They just may not yield as high of an income level as rental properties.
Crowdfunding passive income is a relatively newer concept; it involves participating in the funding of real estate properties. With crowdfunding, you are one of various investors. The amount you need to pay for crowdfunding and the amount of passive income you can receive varies heavily from one investment to the next. But the cost is generally lower because multiple investors share the burden.
When considering crowdfunding options, it’s important to review investment opportunities carefully. Returns on these investments are not guaranteed. Therefore, having as much information as possible before investing is key to maximizing the amount of passive income you receive.
Another common passive income opportunity in this market is investing in a real estate investment trust (REIT). REITs are privately or publicly traded businesses that rely on their investors’ money to manage commercial real estate. These companies must payout at least 90 percent of their taxable income to their investors, also known as shareholders. In return, the business receives considerable tax benefits.
REITs are considered an excellent starting point if you’re just getting started with passive real estate investing. Upfront investment costs are relatively low, and opportunities are easily accessible.