Passive income is money you can make with little day-to-day involvement. It takes time to plan and set up the initial process but eventually you can create a continuous stream of income. Some examples of passive income are real estate income, such as buying rental properties, creating a money-making blog, or investing in dividend-producing stocks.
Building a passive income is a wonderful way to fund your retirement. You can hedge it against a job loss or insufficient retirement income. Creating passive income via rental property requires precision planning and advice from trusted professionals. You must do due diligence and detailed research about these three things before moving ahead.
The hallmark of real estate investing is location, location, location. The property should be in a safe neighborhood and close to all amenities. Looking at the school ratings in the vicinity will give you a good idea of the demographics. When buying the first rental property, it is always a good idea to buy local. Do your research and make sure the property prices and the rents are steadily rising in that area. In the Boston area, the property prices are quite high, so make sure you are working with a trusted lender and have your financials in order. Your real estate agent will give you the best advice about the potential of rental income. You can start your research online on Zillow and check out their predicted rent estimates.
Type of Rental Property to Buy
The two main categories of properties are residential and commercial. Residential properties include homes, apartments, and townhomes. Office and industrial buildings fall in the commercial category. Buying foreclosures can be a great investment opportunity if the price is right. You must connect with an expert contractor and get the property thoroughly inspected and remodeled. With just the right investment up front you will enjoy the benefits for years to come.
Active Versus Passive Income
Rental income is always considered passive by the IRS, but you can decide how involved you want to be. You can manage the property on your own and save day-to-day maintenance cost or have your property managed by a registered property management company for a 10-15% fee.
With proper due diligence and the advice of a trusted contractor and real estate agent you can be on your way to buying your first rental and increasing your retirement income. To learn more about contracting services for property investment, contact us today.