If you’re like the typical American, you only have around $9,000 in liquid savings stashed away. And if you hit a financial emergency, you’re going to need more of a cushion.
That’s why you should turn to passive real estate income to shore up your finances.
Your success boils down to choosing a property with potential — and getting the right tenants.
Read on to learn if real estate passive income is right for you!
Location, Location, Location
Wondering how to invest in real estate for passive income? Start by considering where you want to invest. It’s always better to invest in a neighborhood that’s on the rise versus one with empty storefronts.
Evaluate the job growth and quality of the school systems. Look at crime maps. And consider the value of investing in a house or apartment building that requires a little more elbow grease.
Getting a foreclosure, or property that has been seized, could yield a price that’s two-thirds the cost of another property. You’ll have to invest some effort to make the property livable on the front end. But once it’s ready, you have the ticket to passive income real estate investing!
Get Passive Real Estate Income With the Right Budget
Before you get too far ahead of yourself, do some math. That means calculating how much you’ll need to invest in a down payment to secure the property. It also means calculating mortgage payments and maintenance.
If you can put more money toward a down payment, you can see a cheaper monthly mortgage payment. Do the financial projections for monthly and yearly payments. That will inform how much to charge for rent.
And don’t forget about those pesky taxes! These will vary by location, so check your state’s percentages.
For instance, you may need to pay up to 2% of your property’s value in taxes. That can translate to around $4,000 annually for a property valued at $200,000. When in doubt, check out these resources to get a handle on investing finances.
Real Estate Passive Income May Hinge on the Landlord
Once you’ve made your property look good, it’s time to find tenants. While that may sound easy enough, this step can make or break your real estate passive income potential. A lousy tenant won’t pay rent, saddling you with extra financial and disciplinary responsibilities.
Choose tenants with good credit histories and stable employment that can be verified. Conduct a background check and hold an interview. Don’t be afraid to ask for references, either.
You can generate passive real estate income with the right landlord and tenants. It may be easier to outsource the responsibilities of being a landlord to someone else.
But if you do, add landlord insurance to your to-do list. This policy can protect your property if it experiences significant damage, like a fire or storm.
Learn How to Make Passive Income
Real estate passive income can supplement your existing income while requiring little effort on your part.
Invest in a property in a promising neighbourhood with a stable economy. And before you sign any documents, make sure you have the cash reserves to make repairs and cover other costs.
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