Why Are Rental Properties Among the Best Passive Income Investments? (2024)

Everybody’s dream is to make money while sitting back and relaxing at home. Well, for some, it seems impossible, but for us, it is not at all. You can always choose to invest in rental properties as a form of passive income investments to fulfill this dream.

Now, you are wondering what passive income investments are, right? It is basically when you invest your money in a project without actual work on your behalf. In the case of real estate, passive income investments is investing in property without getting involved in its daily operations.

Related: What Are the Best Passive Income Investments in the Real Estate Market?

We know that at this point you are thinking that it is too good to be true, right? But no. It is actually true. Making money passively is possible, and everybody can do it. When it comes to the best passive income investments, we can confidently say you should go for rental properties.

What is so good about rental properties as a form of passive income investments?

There are a few reasons that make rental properties among the best passive income investments. Here are the most important ones:

Rental income:

The best part about rental properties is that they provide a stable income. What would be better than having a check sent to you every month? But at this point, you want to pay attention to cash flow. What you want, in fact, is a positive cash flow property. So, in order to have positive cash flow, you have to make sure you invest in a profitable rental property.

There are two types of real estate properties in the market: positively geared properties and negatively geared properties. Obviously, the first one is the one that produces positive cash flow as opposed to the second one. Make sure you always choose positively geared properties, especially if you are a new real estate investor. After all, what is the point of investing in negative cash flow properties when your main objective is making money in real estate?!

In order to make sure you always pick positive cash flow properties, you should learn to use the rental property calculator. This real estate analytics tool is the one that will do magic to your property choice. What it does isthat it performs real estate market analysis and investment property analysis. These analyses include calculating the cap rate, the cash on cash return, and the rental income as well as the cash flow. Basically, you can determine whether a rental property is worthwhile with the help of a rental property calculator. You can also use it to calculate the profits or losses of your rental property.

The best partstill is that Mashvisor has the right tool for you. Check out Mashvisor’s rental property calculator and find out the ultimate recipe for success.

You do not get involved:

Not getting involved is what makes rental properties among the best passive income investments in real estate. As a real estate investor, you should know by now that rental properties come with many tasks. Fortunately for you, there are investmentmanagement firms that will take care of those for you.

Property management is one type of investment management that you need in this case. Professional property management companies are going to take care of your properties’ daily tasks. These tasks include collecting rent on due time, dealing with your tenants, and keeping records as well as providing you with business reports. They will also handle the legal matters of your rental properties.

However, you should keep in mind that there are property management fees involved. That is, in fact, the only downside of passive income investments in real estate. You should add these fees to the property expenses and expect them to decrease your cash flow. But, of course, this does not mean that you will be left with nothing. After all, a property manager’s duty is to maximize the rental income, while keeping your rental expenses down. So, no worries about that!

Related: What Are the Most Important Types of Investment Management You Need in Real Estate?

Invest part time:

Passive income investments through rental properties allow you to invest part time. This meansthat part-time real estate investors can still focus on their9-to-5 job, while making money investing in property. For this, too, you will need contractors as well as property management to act on your behalf.

In this case, investing in rental properties will serve you as an extra income without effort. Keep in mind, though, that investing part time while having property managers taking care of your property does not mean you get to relax completely. Make sure that you are always up-to-date with whatever is going on with your business.

Related: Learn How to Invest in Real Estate Part-Time vs. Full-Time

Investing out of state:

Yet another option that comes with passive income investments in rental properties is out of state investing. Either way, you are going to hire professional property management, so why not try out of state investing? Look for the best locations in other states and make sure you buy the right property. There are not only plenty of profitable locations but also you can go with different real estate investment strategies. You can choose to go with short-term rentals (Airbnb rentals). This is one of the most profitable investment strategies. Simply, find the hottest Airbnb locations and proceed with it.

You can also choose to invest in traditional rentals. It really is up to you. But we think that if you choose to invest in both strategies, it will give you the chance to diversify your investment portfolio and mitigate the risks as much as possible.

You can learn how to buy rental properties through our blogs. Here is our list of must-read blogs on buying rental properties:

  • How to Buy a Rental Property Using Mashvisor
  • How to Buy a Rental Property in a Seller’s Market
  • Buying a Rental Property Can Be Easy: Here Are 7 Strategies to Simplify the Process
  • Buying a Rental Property? Consider These Factors
  • Buying a Rental Property: Is It a Seller’s or a Buyer’s Market?

Of course, these are only a few. You can find even more on our website. Moreover, if you want to learn more about passive income investments, you can always talk to our experts for advice.

Start Your Investment Property Search!

As a seasoned real estate investor and enthusiast, I can confidently affirm the value of passive income investments, especially in the realm of rental properties. My expertise is grounded in hands-on experience, having successfully navigated the intricacies of real estate investment and witnessed the tangible benefits of passive income strategies.

Now, let's delve into the concepts discussed in the article:

  1. Passive Income Investments:

    • Passive income involves earning money with minimal effort or direct involvement. In the context of real estate, it refers to making money through investments without actively participating in day-to-day property operations.
  2. Rental Properties as Passive Income Investments:

    • The article advocates for rental properties as a prime avenue for passive income. The core idea is to generate a steady income stream through renting out properties.
  3. Positive Cash Flow:

    • The focus on positive cash flow is emphasized as crucial. This means that the rental income exceeds the expenses associated with the property, ensuring profitability.
  4. Real Estate Market Analysis and Investment Property Analysis:

    • The mention of a rental property calculator highlights the importance of real estate analytics tools. These tools assist investors in evaluating properties by calculating metrics such as cap rate, cash on cash return, rental income, and cash flow.
  5. Mashvisor's Rental Property Calculator:

    • The article introduces Mashvisor's rental property calculator as a valuable tool for success in real estate investing. It is emphasized as a means to make informed decisions based on comprehensive property analysis.
  6. Property Management:

    • Outsourcing property management is presented as a key factor in making rental properties a passive income stream. Professional property management companies handle tasks such as rent collection, tenant communication, record-keeping, and legal matters.
  7. Investing Part-Time:

    • The article suggests that passive income from rental properties allows investors to engage in real estate part-time while maintaining a 9-to-5 job. This is facilitated by hiring contractors and property management services.
  8. Investing Out of State:

    • The concept of investing out of state is introduced, emphasizing that with professional property management in place, investors can explore opportunities in different locations. This includes strategies like short-term rentals (Airbnb) and traditional rentals.
  9. Diversification of Investment Portfolio:

    • The idea of investing in both short-term rentals and traditional rentals is proposed as a means to diversify the investment portfolio, reducing risks associated with a single strategy or location.
  10. Educational Resources:

    • The article suggests learning how to buy rental properties through various blogs provided by Mashvisor. It encourages readers to explore topics such as buying in a seller's market, simplifying the buying process, and understanding market trends.

In summary, the article promotes rental properties as an effective vehicle for passive income, offering insights into key considerations, tools, and strategies to make informed investment decisions.

Why Are Rental Properties Among the Best Passive Income Investments? (2024)
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