LEARN HOW YOU CAN ENJOY LESS WORK AND MORE PLAY WITH THESE SMART INVESTMENTS.
Traditionally, real estate investment is a fast paced industry that rewards long work hours and ingenuity. While the payoff can certainly be satisfying, it can sometimes leave little time for other passions and opportunities. Alternatively, the prospect of earning an income with minimal effort may seem like a fantasy reserved for the 1%, but with smart investments in commercial properties, it is possible to earn a paycheck with little work on your part.
So how does one make money on an investment without dealing with the daily headaches of being a property owner? To answer that, we must first establish the differences between active and passive income.
What is Active Income vs Passive Income?
Active income, as the name suggests, is money earned for services provided. In real estate, developing land, renovating and flipping properties, wholesaling, and conventional real estate brokerage all fall into the active income category as they all require a lot of your time and sweat to produce a positive outcome.
Passive income, however, are earnings acquired through renting property, limited partnerships, and other endeavors with responsibilities for management largely falling to someone else. You use your funds to make the initial investment, then sit back and reap the rewards. While truly passive income is rare, it can be done, and commercial real estate is one of the best methods for doing just that. So what are the best investments for passive income?
Investment Options for Establishing Passive Income
Below are some of the investment options you can explore for passive income:
Multifamily: Purchasing a property like an apartment building can allow you to charge rent from multiple tenants, making any money made after expenses profit in your pocket. However, it is essential to employ a quality property management company, such as Palmetto Commercial Real Estate, to handle the day-to-day details, otherwise this option will go from passive income to very active, quick!
Triple Net: One of the most enticing options, triple net investments involve obtaining a free standing property to be leased to a large business such as Target, Wells Fargo, or Krispy Kreme that handles their own management due to brand consistency. While the initial investment can be high, a company that leases your property for 10 – 25 years and handles everything for you doesn’t get much better in terms of passive income options.
Notes: This option allows you to essentially assume the role of the bank as you purchase and sale promissory notes, or debt. By investing in notes, you take over the loans from the bank and collect the payments (principal and interest) with no work on your part.
REIT Investing: Real Estate Investment Trusts function similarly to companies that sell shares of stock. Instead of investing in a company, however, you share ownership with other stakeholders on a piece of real estate. REITs offer some good tax benefits, and shares can be bought and traded through the internet.
Tax Liens: Investors can opt to obtain liens from the government on delinquent property taxes, providing another good opportunity for passive income. When individuals get behind on paying property taxes and penalties begin to accumulate, the government may choose to sell the lien (money owed) to minimize loss. The investor benefits from the interest and payment penalties included on the lien, and if the owner doesn’t pay off the delinquent taxes, the investor has the option to foreclose.
Commercial properties can provide an excellent opportunity for income with little involvement on your part. Contact our experienced brokers at Palmetto Commercial Real Estate to get started on finding the perfect property for earning you passive income today!