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Being a responsible parent is difficult for both men and women as they have to balance between earning enough income to provide for all of their children’s needs and still being able to spend quality time with them. Real estate has been one of the most profitable – and safest – investment strategies in the past decades. Nevertheless, many mothers and fathers are reluctant to become real estate investors and make money in both the long term and the short run due to the perception that this endeavor requires a lot of time and effort. While real estate investing can be a very time-consuming and engaging undertaking, it can also be done passively. Here are the 4 best passive real estate investment strategies which you can apply without sacrificing the already limited precious time you get to spend with your children.
1. Rental Properties
Usually buying a rental property is considered an active investment strategy, but this doesn’t have to be the case. Investing in a traditional, long term rental property or an Airbnb, short term rental does not need to amount to becoming a landlord or an Airbnb host, respectively. There are plenty of real estate tools and professionals out there that can turn rental properties into a source of passive income. To begin with, the advancement of big data and predictive analytics has turned the real estate analysis process necessary for buying a profitable investment property into just a few minutes. Real estate data analytics platforms like Mashvisor allow part-time and beginner investors to find lucrative rental properties from the comfort of their home or office, eliminating the need to conduct data collection, analysis, and calculations manually. Real estate software tools save at least three months’ worth of research when buying a rental property. Later on, instead of being landlords or Airbnb hosts, busy mothers and fathers can hire a professional property management company such as Vacasa and hundreds of others to take care of all aspects of owning and managing an income property. Meanwhile, they get to enjoy spending their passive rental income with their children. The most important benefit of investing in a rental property is that you can make money in the short term – through rental income – as well as in the long run – through real estate appreciation.
2. Buy and Hold
Another passive real estate investment strategy appropriate for parents is buy and hold. This approach entails buying an investment property in a market which is expected to appreciate fast in the coming years. The reasons for this expected above-average appreciation could include major infrastructural projects, real estate developments, big corporations’ opening offices in the area, or many others. Buy and hold real estate is a passive investment strategy because once you buy a property, all you have to do is to wait for its value to increase enough to make it worth selling it, for a significant profit. As one example, this strategy is excellent for people with small children whose expenditure is anticipated to increase drastically in 10-15 years when their children go to college. The downside of buy and hold though is that you don’t get to earn income in the short term. You only make money when selling your investment property. To overcome this drawback, clever real estate investors can combine buy and hold with renting out.
3. Real Estate Crowdfunding
Technology-savvy parents looking for the best way to start investing in real estate should consider crowdfunding. This is a relatively new passive real estate investment strategy that has been enabled by the technology development and social media expansion witnessed in the past decade. Crowdfunding websites constitute platforms that mobilize dozens of small investors to pull together their financial resources in order to make shared real estate investments. Crowdfunding is a true source of passive income. Once you have selected the platform through which you want to invest, you can start collecting dividends without managing real estate properties, while spending quality time with your family instead. Another important advantage of this real estate investing strategy is that it requires significantly less initial capital than investing in rental properties or buy and hold. While the minimum down payment on investment properties for sale amounts to 20% of the purchase price, you can invest as little as $500 on some crowdfunding platforms like Fundrise.
4. REITs
REITs stands for Real Estate Investment Trusts and comprises one of the oldest approaches to passive real estate investments. REITs own, operate, and finance income-generating real estate assets and give individual investors the opportunity to buy shares in the trust. This structure makes investing in REITs very similar to investing in stocks, which takes away some of the excitement of a more hands-on real estate investing experience. However, it also makes this strategy very passive as investors receive dividends and capital gains without being directly or indirectly involved in the assets’ management. By law, REITS in the US are obliged to pay 90% of their taxable income to shareholders which means that the vast majority of the profits get distributed back to the investors. On the negative side, investing in REITs requires more money than investing in crowdfunding because of the minimum capital requirements of most trusts.
In conclusion, you should not refrain from becoming a real estate investor because of fear that you will have no time left to spend with your beloved ones. Investing in real estate properties can be done passively to provide you with the extra financial security that all of us could use.
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This content is brought to you by Daniela Andreevska.
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