What is Passive Income in Real Estate?

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Posted by IPS Commercial on November 29, 2022

One of the crucial things you need to be successful in your investments is to make passive income. In general, real estate passive income simply means you’re getting profits monthly without actively working for it. This additional income can help you save more for retirement, reinvest it into other real estate properties, and allows you to focus on other things like health and family.

While you can make passive income in numerous ways in real estate, here are the most common ones:

  • Rental properties → Generally, when you have a property that you rent out, this can be classified as a passive income as long as you’re not the one directly managing the property. For example, if you’re looking for tenants, coordinating maintenance, repairs, and more, then this makes it an active income and investment.

On the other hand, if you hire a professional real estate agent to manage your property, then any profit you make becomes a passive income.

  • Investor → If you make an investment in a business or properties that earn a profit, and you don’t actively participate in it, then that qualifies as a passive income. 
  • Self-charged interest → It’s possible for investors to lend a loan for a business or an individual, and then subsequently, enter a contract where interest is added to the loan. The income you get from the interest then counts as passive income.

Building a good real estate portfolio means you need to figure out a way to create numerous avenues for passive income. Before you can do this though, here are the most common mistakes you need to avoid in making a passive income in real estate:

  • Not enough research on real estate properties before investing in them
  • Your real estate portfolio isn’t diversified to maximize passive income opportunities
  • Investing in too many real estate properties that you can’t maintain or repair all at once, if need arises
  • Micromanaging your agents for maintenance, repairs, reports, and more on your property

Once you’re ready to start passively earning profits in real estate, the next step is looking for the right property to invest in. Make sure to check out our commercial listings offering investment opportunities that will give you passive income! 


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