Real Estate as Passive Investment

real estate property

primeimagemedia via flickr

 

Often when people think of investing in real estate, there is often one bad renter’s story that comes to mind. I know of several people who have taken a financial hit from bad renters. This shouldn’t discourage using real estate as an investment. In fact, real estate investing can be one of the most passive investments out there. While I will get into the details of why you should consider investing in real estate in the future, I want to briefly explain why I include real estate as one of my passive income streams in my early retirement plan.

 

When Real Estate Is NOT Passive

Investing in real estate doesn’t always guarantee that you are getting a passive investment. As I mentioned, it can become quite the chore. One bad renter usually scares people away from staying a real estate investor. It doesn’t take much to imagine the late phone calls from your tenants with an emergency. The simple truth is that houses deteriorate or wear down. Residential properties take work to maintain. While you can purchase newer homes, it still doesn’t guarantee that something won’t go wrong. Because tenants don’t own the property, it can be true that they won’t take care of it like they would if it were their own property. Cleaning up after tenants and getting ready for the next tenant can be a lot of work.

Real Estate as a Passive Investment

Owning AND managing your own rental properties is by no means a passive investment. However, that doesn’t mean that owning real estate can’t be passive or require little work. Ensuring that your real estate investment is a passive investment is as simple as hiring a property manager. Property managers do all of the leg work for you. They handle the day to day chores that would otherwise keep you from sleeping at night.

There is nothing better than owning a rental property that is getting paid off by the tenant and managed by someone else. That’s right – the only thing that is required of you is the financial risk. The risk isn’t large either. The fact of the matter is that if you can find the right property with the right mortgage deal, you can be on your way to securing a passive income. Finding the right property manager isn’ t always easy and it can take some upfront effort, but it can pay off in the long run.

Before you know it, your mortgage will be paid off and the cash will be rolling in big time! If you are wondering why real estate is included in my passive income retirement plan, it is for this reason. There is a little upfront work (finding the right property, selecting a property manager, etc.), but the future payoff is much higher. Once I find the right property with the promise to have a positive cash flow (even after paying a property manager), I will jump right in! If you start investing now, your future will be much easier than starting later.

What’s important to consider is that having this income in the future will allow me the flexibility to do anything I want. If I start investing now, I will be ahead of the game. I would hate to let a little risk keep me from living the life I want to live. I hope to achieve my goal to retire early by using retirement.