6 Benefits of Passive Income in Real Estate
In June 2021, property prices had grown by 16% year upon year. The lure of property as an investment is that once purchased; you can do very little with it and still earn money. But do you know how easy making money like this is?
The hands-off approach is one many are leaning towards. Read on as we discuss how to earn passive income from property.
1. Appreciation
How to make passive income starts and ends with appreciation. When you buy a property, it naturally gains value. This is despite dips and peaks in the housing market.
This is known as appreciation. All you need to do is hold onto the property until it reaches a value you are happy with. From here, it can be sold for easy income.
2. Cash Flow
When you have a property, you can earn from it while it appreciates. Be it a residential letting or a holiday home; as the property rises in value, you can also take rent from it.
All you need to do is manage and maintain the property. For a small fee, you can even get companies to do this for you. This means you make a profit without lifting a finger.
3. Mortgage Paydown
A paydown is when you reduce the amount owed on a debt. In the case of property, having tenants in it actually brings down the mortgage you owe. As they pay rent, it can pay off the mortgage debt for you, leaving you to benefit.
If you have multiple tenant occupancy, this can work even better. You may consider opening multi-family homes or student accommodation and renting out single rooms.
4. Risk Diversification
Having a passive income from the property also lets you diversify against any risk. This means if your stocks or shares take a hit, then your property can act as a buffer. If your commodity investments rocket up when the property goes down, you don’t face overall loss.
There are also lots of ways to diversify risk within the property itself. You could invest in different types of property, from residential to commercial. Larger schemes can also be invested in through real estate investment trusts.
5. Tax Efficient
When you buy a property and keep it for appreciation, it is known as a buy-and-hold tactic. Long-term tactics such as this are extremely friendly on taxes. This means you are not paying extortionate amounts when the time comes to sell your investment.
6. It’s a Liquid Asset
Property is a liquid asset. Assuming you are not in a partnership or group, you can sell it and have the money in your bank account within a few months. If unexpected money problems occur or you just need extra capital, the property can give you a much-needed cash injection.
Passive Income
Now you know how to earn passive income from property and its advantages, get started. All you need is the outlay to get started, and from there, you can sit back and watch the profit total up.
If you found this article helpful, we have many more. From personal finance to investment, we can help manage your money in the coming year.
Trevor Anderson wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.
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