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3 Factors To Consider Before You Invest In Real Estate

You’ve probably heard the expression, “make money while you sleep.” It’s easy to understand why passive income is ideal.


Earning passive income is a goal many share. You’ve probably heard the expression, “make money while you sleep.” It’s easy to understand why passive income is such an attractive proposition! People desire to earn extra money on the side that doesn’t require a lot of “active” work to continue making it. In essence, you can do most of the work upfront and put some additional effort along the way to earn a passive income.

There are a multitude of ways to earn passive income. First, identify the niche and strategy that would best fit your goals, resources, and abilities. For example, maybe you’ve considered investing in real estate to sell or rent. This can be a lucrative side hustle. However, you’ll need to take certain factors into account before you commit to becoming a real estate investor.

Here’s a look at three key factors to consider.

 

Landlord Responsibilities

Virtually no means of “passive income” is truly passive. You’ll have to put in a lot of work upfront to earn money that eventually becomes less work over time. If you choose to invest in real estate and rent to tenants, are you up for the responsibilities of becoming a landlord?

As a landlord, you’ll need to be well-versed on a variety of matters and ensure you have thorough knowledge of the landlord-tenant laws in your state (or hire an attorney who does). Also consider how you will manage and possibly outsource repairs and maintenance, rent collection, lease enforcement, and other tasks associated with owning rentals.

The long list of responsibilities associated with being a landlord should not discouraged you. You can partner with a property management company that can take over many of those tasks on your behalf. You might think this wouldn’t be ideal, given that the company’s fee will cut into profits. Yet, in truth, partnering with the right company will often help you earn more money over the long run because they’ll assist you in attracting and keeping model tenants.

 

Budget

This may be an obvious point, but it’s a crucial one. Investing in real estate can be expensive. You have to consider the costs of repairing and maintaining property. If you don’t have access to the funds necessary to justify the purchase and associated holding costs (e.g., recouping expenses through market rates for your rental), you may want to reconsider.

To get started, you can leverage the equity in your primary residence or take out a loan to invest in a new property. In truth, most investors don’t buy real estate holdings with their own cash upfront. However, determine whether you’d feel comfortable taking on that risk.

 

Opportunities

Investors must explore genuine investment opportunities to pursue their dream of earning passive income through real estate. Don’t overlook this critical detail! You might be excited by the prospect of investing in a property, only to discover there are no suitable properties in the ideal location. That said, this is why it is wise to partner with a property management company.

If you want to handle all of the property management tasks on your own, you’ll need to reside in close proximity to the properties. This alone limits your geographical investment options. However, if you depend on the expertise of a property management company, you won’t need to live nearby. There will still be times when you may want to visit a property you own, but it’s not a necessity if you enlist the help of property management specialists.

 

In Closing

None of this is meant to discourage you from becoming a landlord. On the contrary, real estate can be a tremendously lucrative investment that will enable you to earn a lot of extra income without requiring much work on your part over time. You just need to know what you’re getting into before choosing to make this venture your ideal source of passive income.

 

Craig Lebrau is the CMO of Media Insider, a Wyoming-based PR company that aims to disrupt the way companies communicate their brand in the digital era.

 

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Photo: ArchiVIZ, YFS Magazine, Adobe Stock
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