The economic downturn highlights the importance of creating passive income. Here’s why you should look at real estate
Most people make a living based on the work they produce or the services they render. When they stop working, they stop receiving this income. Passive income is earnings through assets where the owner is not actively involved. This is where your money works for you and that's the only way to achieve financial freedom.
Real estate has proven to be a great investment opportunity for investors. There is a common misconception that passive income real estate requires no effort. However, depending on the type of rental strategy you implement, asset owners need to lay the groundwork to start generating income. Once you have the rental up and running, your space will provide residual income without having to participate in regular work.
Many owners have accumulated substantial wealth through traditional rental strategy. Investors purchase homes or commercial spaces and rent them out. As a landlord, you earn recurring income every month.
We live in an on-demand world where people prefer access to a service over ownership. Evidence of this shift is all around us -- Netflix instead of DVDs and Uber instead of cars. Instead of buying a product, subscribe to a service that enables users to utilise the exact features you require.
Low rental yield in traditional rentals pushed for this new model in real estate. Space as a service is an offering where a physical location is combined with specific amenities to provide an on-demand experience. The value of this model is partially explained by its plug-and-play model, which offers all amenities being taken care of by the provider of the space and shared access of under-utilised assets to use the space effectively. It transforms the landlord from a rent collector to a service provider.
Co-living spaces as the name implies is a housing arrangement where renters share the under-utilised amenities like kitchen, living room and accommodates more residents than an average housing situation. Lack of affordable housing in urban localities where high rents and high cost of living makes it financially attractive to share living quarters with strangers.
The demand led by students and young professionals as it offers flexible contracts, affordability, plug and play living, community engagement and provides a hassle-free living experience.
For asset owners, the co-living model offers 7-11 percent higher rental yield than the 3 percent national residential average, according to a report by ANAROCK Property Consultants.
Short-term rentals are furnished accommodation that is rented out on short periods of time, from a few days to a couple of weeks. If you have a property that can be positioned well as an alternative to a hotel room, you can earn a better income this way. Depending on the location, short-term rentals provide 30 percent higher profit than long term rentals.
While you are responsible for the management and maintenance of the rental, you can hire a property manager to do it for you.Conclusion:The real estate market has helped many investors boost their income and create financial freedom. However, a deep understanding of the local market is crucial to your investment success. Although buying properties may be out of bounds for many individuals, there are many other ways to invest like real estate investment trusts (REITs) and timeshares that can be purchased to enjoy passive income.The author is the founder of Hubloft, a home-sharing company that enables homeowners to create passive income from their second homes.