5 Ways to Turn Real Estate in to Passive Income

Everyone wants to increase their wealth by investing their money intelligently and strategically. Real estate has yielded an average annual price increase of around 11.3% per year, making it one of the best sources of passive income.

With its attractive features such as high security, low risk, and high returns, real estate investment is no doubt, one of the most lucrative investment opportunities in town. There are so many ways in the real estate market that you can adopt to kickstart your journey to financial freedom.

If you are interested in learning more about these ways, keep on reading.

1. Rentals

Residential rentals:

One of the most common options of making money in real estate is through long term rentals. Basically, you buy and hold properties and use them to generate rentals in the long run.

If you are looking for making money in an easy way, long term rentals can be your best friend. Contrary to other investment opportunities, real estate comes with an inflation hedge. It means that people will always need a place to reside and they will always be looking for rental properties.

If you are interested in getting a rental property of your own, do consider the location of the property. It is the most important aspect in real estate because good locations come with high asset value and the value gradually increases over time. Also, it is very easy to get good rentals at a good location. Do your research and due diligence and then invest in a property.

Tip:

If you find a rundown home at a good location, do consider buying it. There are many rundown homes with no down payments which is also a plus. Invest some money, fix the house and you are good to go.

Commercial rentals:

Another category of real estate that is exceptionally fruitful is commercial real estate. In commercial real estate, you are not only flipping properties but you are also developing them and continuously adding more value to it.

People always need office space and retail to run their businesses. In short, there will always be a demand for rental spaces such as shops and offices. Also, in a growing economy like Pakistan, commercial properties are getting popular day by day.

For example, consider investing in a mall. Apart from getting a tangible asset, you are also getting monthly rentals. Interestingly, you don’t have to spend a lot on the maintenance of your commercial properties such as a shop in a mall. Malls are continuously being renovated and upgraded and you do not have to spend your money on continuous renovations.

If you have low capital and you still want to invest in commercial properties, go for leasing. There are many options in the Pakistani commercial real estate market for lease.

2. Leasing

Another great way to earn money in real estate is through the lease. A lease is a contract by which one party conveys land, property, services, etc. to another for a specified time, usually in return for a periodic payment.

If you are someone who does not have huge capital at hand, this might be the perfect option for you. Leasing does not require a significant amount of capital. You’re leasing with an option to buy.

Leasing works best when the real estate market is going up. In that scenario, you are creating a preset price at which you can purchase the same property later on. In easy words, if the real estate market is doing well, you will be able to buy the leased property at a discounted rate. At the end of the day, leasing can be pretty profitable.

3. Home flipping

The term “house flipping” is used by real estate investors to describe the process of buying and selling properties. In other words, home flipping is all about purchasing a revenue-generating asset and quickly reselling it for profit.

Home flipping is common in Pakistan as well. Although home flipping can be highly rewarding, you should also do your research and due diligence before making any sort of purchase in real estate.

If you lack knowledge of real estate, you might end up getting yourself in trouble because there are a lot of scams in the market. Make sure you are connected with a good real estate agent and you know the repair costs of the house.

Be creative and try to reduce your costs by being strategic and imaginative. For instance, you can visit auctions and thrift stores to look for fixtures and other interiors.

Matt Larson, a real estate expert, says that over the years he has learned that the ugliest houses at good locations are gold. These properties have real value for money. Take his advice and explore the properties around you.

4. Short sales

A short sale is the sale of a real estate property for which the lender is willing to accept less than the amount still owed on the mortgage. Usually, a short sale happens when a homeowner is financially distressed and sells his/ her property for less than the amount because of the mortgage.

For a sale to be considered a short sale the owner must be far behind in making his mortgage payment and secondly, the housing market should be below so that the home value is less than the remaining balance on the mortgage. For a successful deal, all parties have to agree to the transaction since the property is being sold off for less than is owed on the existing mortgages.

If you are looking for an investment opportunity that may lead to quick profits, short sales might work for you.

5. Vacation rentals

You must have heard about Airbnb. It’s an online platform where you can get connected with people who are looking for homes for a short duration of time. It is an excellent way to use your extra space and earn some extra money. You can turn this idea into a full-time business as well.

Vacation rental or short-term properties are accommodations that travelers can rent on a short-term basis. Vacation rentals are getting popular day by day and now it is being considered as one of the most lucrative paths to profits in the real estate industry.

If you reside in an area that is heavily populated by the local and international tourists, this might be a feasible opportunity for you. Places like Murree, Hunza, Gilgit, Lahore, Karachi, Islamabad are well known for having a high demand for these short-term rentals.

And the best thing about vacation rentals? You do not have to own the place. Many people have their vacation rental business and they do not own the place. However, they do provide the high-end consumer experience to all the clients.

If you are living in a famous tourist destination and have a spare room or two, rent them out and earn monthly. If you want to look for customers, simply sign up with any online platform such as Airbnb. Also, try to connect with people and build networks. Work on your services and try your best to get good reviews from the customers because businesses like these solely work on word of mouth.

Investors are needed for real estate projects because the capital requirements are high. If you do not want to involve any investors, we suggest you go with vacation rentals.

So, these are some of the ways which you can adopt to multiply and grow your income. All these options are practical and relatively easier to start in Pakistan.

Real estate investing is one of the best ways to secure your money for the longer run. It not only secures the money but also gives your money a path to grow.

If you are new to real estate and do not know how to start investing in real estate, we suggest you start small. Explore the market, try to understand the nitty-gritty details of real estate, and then expand your portfolio. Invest in these options and let us know about your experience. If you have any questions regarding the listed options, get in touch with us.

Disclaimer:

None of the information published in this article should be construed as investment advice. We strongly advise our readers to always do their due diligence before investing in any project. It is the reader’s responsibility to know the laws regarding investments in their region.

Narmeen is a content writer at Graana.com.
Other than writing, she loves to paint and read non-fiction books.