Making money outside of your day job is a great way to boost your net worth, reach your financial goals, and fund your future retirement. But navigating the world of commercial real estate investments isn't easy. So before you jump in feet first, there are a few things you need to know ahead of time. Today, we're breaking down the best ways to generate passive real estate income and how to avoid common (and costly) mistakes.
What is passive real estate income?
Passive real estate income is exactly what it sounds like; it's income made from real estate investments that don't require active or significant ongoing participation. Similar to investing in bonds, it's income you earn without having to trade your time for money as you do in traditional forms of income. However, unlike very low-yielding bonds, CRE investments can produce strong, consistent yields.
Please note, the word “passive” can be somewhat misleading, as there is necessary work involved to create the income upfront. The difference is, once the upfront work is finished, then the income becomes highly passive...often referred to as ‘mailbox money’ because rental checks just show up in your mailbox.
How to profit from your real estate investments
There are a number of ways to generate passive income from real estate investments. Perhaps one of the most common ways to is through rental properties. Investors who work with professional real estate advisors can create a steady revenue stream from rental income.
These professionals will ensure the amount of rent you collect surpasses the amount paid for mortgages, maintenance, taxes, insurance, and property management services. They'll also help you identify value-add properties, navigate 1031 exchanges to defer paying capital gains taxes, and determine the right time to buy or sell your commercial real estate investment properties.
Benefits of working with a professional commercial real estate investment advisor
There are many reasons to work with a professional commercial real estate investment broker. For starters, they'll help you avoid common and costly mistakes many DIY investors make. In addition, your investment broker should also help you:
- Determine your risk tolerance and investment goals
- Identify income and yield expectations
- Determine investment property types, location preferences, and tenancy characteristics that align with your investment goals
- Identify qualified tenants that align with your portfolio criteria
- Create and quantifiably analyze comparison matrixes for investment options
- Submit and negotiate proposals, leasing agreements, and LOIs (Letters of Intent)
- Conduct site visits of potential commercial real estate investment properties as needed
- Review PSAs (Purchase and Sale Agreements) and negotiate final deal terms
- Compile and review all Due Diligence documents on your behalf
- Close with the title company
Here at Fountainhead Commercial, we also help commercial real estate investors who are interested in selling or acquiring properties while navigating the complexities of 1031 exchanges to help investors defer paying high capital gains taxes.
Get help generating passive real estate income with an expert
Effectively completing the critical steps of commercial real estate investing is challenging. And not having an experienced and knowledgeable real estate professional on your side can be costly.
If you're interested in generating passive income, reach out to us today at Fountainhead Commercial. We are a high-touch, client-focused CRE brokerage firm offering best-in-class consultative guidance to the investor; the innovator; and the business owner as each pursues their own unique dream.
So, what are you waiting for? Leverage the expertise of our CCIM broker to negotiate the acquisition or deposition of investment properties to reach your portfolio objectives and start generating passive commercial real estate income.
