Many people sometimes confuse the terms of passive real estate investing with passive profit. Passive real estate is a type of investing, usually in commercial real estate, that does not require one to be actively involved in order to receive profit. Passive real estate investing is often one of the best ways to earn money for yourself, without having to be constantly involved in your real estate business. This means that you can continue to live a completely normal life while you are making money off of your real estate business. In order to truly understand passive real estate investing, however, it is necessary to define real estate investing itself.
Real estate is the purchase and sale of real estate properties between the owners and renters. Some types of passive real estate investing deal with investors who buy low-end apartment buildings and refurbish them in order to sell them for more money than what they originally paid for them. They then rent out these properties to tenants. An example of this would be renovating an old warehouse into a shopping center or other similar use, in order to generate more income from it.
Another type of passive real estate investing deals is real estate crowdfunding, where investors pool their money together in order to finance businesses, like restaurants or bars. Equity is contributed by several investors at once, and the funds used to pay for the property are all put together as one big “check.” Equity contributors receive checks equal to the amount of equity that they have contributed. This can also be useful for creating multiple streams of income from the same real estate deals.
Many passive income investing methods take the concept of equity capitalization a step further. These include things like rent payments to owners of assets, and things like “liens” on real estate properties themselves. Basically, when you lend money to someone, you are making an asset. When you rent an asset, you are creating an asset class. When you “assign” a deed of trust to a real estate property, you are creating a security interest in that property.
The idea is that through various forms of passive real estate investing, you can turn a profit on the real estate without ever actually having to do any of the work yourself. For instance, you could invest in a shopping center, using the mall owners themselves as your investors. You could also go into real estate investing as a landlord and make your rental income from the rent that the tenants of the building to pay you. However, it’s important to note that all of these methods require active investment by the actual owner/occupant of the property, and most importantly, that each method is distinct.
Therefore, if you are considering passive real estate investing, you need to know which methods you’re most comfortable with and learn how to use them to make passive real estate investing a viable part of your overall financial portfolio. It is possible to find an abundance of information on this subject matter, particularly on the internet, so take advantage of that information. You can also research individual real estate investors and their methods to get a better understanding of what you want to be involved in.