It is always lucrative to buy low and sell high. Yet, there is often more to investing in real estate than to merely flip houses at or above market value. Some real estate investors actually turn their investment properties into a regular passive income stream. The following are four tips to help an investor to derive passive income from properties in their portfolio.
The Conservation Reserve Program (CRP)
If you own a property that is open agricultural land in an environmentally sensitive region, then it is possible to receive passive income each year for not farming this land. The Conservation Reserve Program (CRP) is a government-funded program that pays an annual payment to landholders whose properties are placed under the CRP. While payments vary from state to state, placing large qualified land holdings in the CRP can generate substantial passive income each year.
Renting Investment Property
Even if a person intends to sell a property at some point, there is nothing wrong with earning passive income off of that property until that time comes. This is why a lot of investors rent out residential and commercial properties they hold within their investment portfolio. Over the long term, it can actually generate more profit than just reselling a property will do on its own.
A Slight Modification
Another clever way to make passive income renting property is to rent plots of land inside an RV park or in a mobile home park. The tenant is basically paying the landlord a monthly rental fee to have a place to park the RV or mobile home they live in; thus, reducing the liability associated with renters who might do damage to a residential home an investor is renting them. So, be aware that investors have options like this which can reduce their liability and expenses.
Do Not Manage Your Own Properties
When it comes to managing multiple properties, it is generally best to hire a property management company. This takes a lot of the burden off of the investor, making it easier for them to work more lucrative deals. Plus, the expenses associated with property management services are a nice tax write off at the end of the year.
If an investor plays their cards right, they can make their passive income work for them in huge ways. For every passive income stream an investor creates through rental properties and such, this causes banks and lending agencies to want to extend them more credit. This is highly lucrative, because now the investor is using other people’s money (OPM) to purchase more properties and generating more passive income streams. In a few short years of dedicated investing and hard work, investors can be sitting on top of their own passive income empire, and that empire is generating the cash flow to pay for itself.