Have you looked into passive income options for your investment capital? If so, you may want to consider real estate. With over 48 million rental units in the US, it’s a time-tested, popular, and profitable investment.

Well, when you know the facts, you can see why. Here’s what you need to know about passive real estate investing.

What Is Passive Income?

Passive income is income you aren’t working for. When you have a traditional job, this is active income, as you receive a regular paycheck for work you continuously perform.

Conversely, passive income is income that continues to flow no matter what. This can be a result of work you’ve previously completed. Alternatively, it can result from a purchase or investment you’ve made.

For example, if you complete a job writing a blog article for another company and they pay you $100, this is active income. However, if you write that blog for yourself and continue to earn ad revenue every month for years to come, this is passive income. The same logic applies to ongoing book sales, dividend-yielding stocks, and more.

Today, we’ll focus on passive real estate investing. But first, let’s understand the difference between passive and active real estate investments.

What Is Active Real Estate Investing?

Active real estate investing is purchasing real estate and playing an active role in its operations. This includes the traditional method of buying a property, renting it out, and taking care of it yourself, which is the most common form of real estate investing.

However, it also includes investments such as flipping properties, the BRRRR method, and other common real estate investments. Essentially, if you have to be physically present and involved with the operations of your property, then you are an active real estate investor.

This comes with some benefits, as you can maximize the profitability of your property if you aren’t hiring people for maintenance, repairs, renovations, and more. Still, it comes with its disadvantages.

For one, you can’t leave. If you are a landlord, you are stuck near the building, limiting your ability to travel or move. If you need to move for work or retirement, you may have to sell the property.

During a flip or renovation for your investment, you’re tied down, as this is an active job that can take up most or all of your time. However, many investors choose to go this route to save money.

What Is Passive Real Estate Investing?

No, being a landlord is not entirely passive income. However, real estate can offer a passive income with the right type of investment. Fortunately, there are plenty of ways to invest in real estate without being a landlord or flipping the property.

Instead, you can invest in a REIT or real estate investment trust. These pay dividends to shareholders based on rental income and must pay at least 90% of profits to shareholders. This can help you generate passive income right off the bat.

Also, you could consider crowdfunding, which is similar to a REIT since investors share the risks and rewards.

However, it’s often safer to own a specific property, which we will discuss further. This way, you have a tangible asset that you can resell at any time, potentially for a profit. Here’s how to make it generate passive income.

Property Management

You won’t have to worry about your investment if you have the right property management team. The right team can help you set the correct rates, maximize profits, find the right tenants, and take care of your property.

This offers you the freedom to travel, manage other properties, retire, or just sit back and watch the checks come in. You don’t have to be tied down because of your investment property.

Yes, property managers take a small portion of your rent, but this is quickly made up for by helping you set and enforce policies, maximize rental income, minimize vacancies, and more. You just have to find the right property management services.

Why Is Real Estate a Good Passive Investment?

Now that we know how real estate can generate passive income, why should we choose it? Aren’t there other options that can generate passive income?

Well, yes. However, real estate offers some unique advantages. Here are some key examples.


Real estate is a tangible asset you can resell whenever you want (in the right market). Everybody needs somewhere to live, and real estate is not subject to the same volatility as the stock market. This makes real estate one of the best investments available, according to most millionaires.

Long-Term Potential

Not only can you earn back your investment through rental income, but you can also resell the property later on after building equity. Yes, much of your income will go toward your mortgage, which means you will only build equity over time. Essentially, you’re still earning that income.

As you maintain and possibly renovate the property, you may even earn a profit on the back end.


Why are there over 200 video subscription services available? Why is it such a popular business model?

The answer is simple; it offers a steady, predictable flow of revenue and expenses. Well, real estate is the original option for this business model, offering investors a stable and predictable cash flow with ample warning before a vacancy. You can even collect security deposits and last month’s rent for safe measure.

How to Invest in Passive Real Estate

Now that you know some of the benefits, you may be interested in earning some for yourself. Here’s how you can get started!

Choose the Right Property

Always look for high-quality properties with the right features and renovations. The newer the property or renovations, the safer it generally is.

Also, don’t neglect the third-party inspection. Inspecting the property is essential, as you only get one chance to choose the right property. It’s better to spend $500 on an inspection than $20,000 on a major repair you weren’t expecting. 

Generally, we recommend looking for multifamily properties, as these offer the most “bang for your buck.” You may rent a single unit for $2200, but you could rent three units in one property for $1400 each in the same market, which will only earn you more. It will be more expensive upfront but not substantially enough to discount the higher earning potential.

More importantly, make sure it’s something you can afford. If there’s a property you particularly want, save up for a larger down payment and try to have some cash left in reserves for extra security. Also, shop around for loans, especially with interest rates so high.

You Know the “L” Word

In real estate, love doesn’t exist. The “L” word is location.

You could invest in the best property in the world, but nobody will buy it or rent it if it’s in a bad location. The right location can maximize your rental prices, reliability, long-term profits, and resale potential. Conversely, the wrong location can tank your investment.

Do your research on the local market, but also remember the importance of the neighborhood. If a property is close to a highway, public transit line, public park, or downtown area, this is considered relatively safe.

However, it’s essential to remember that these have to be permanent fixtures. You can’t rely on popular bars, stores, or restaurants, which come and go at a moment’s notice.

For the market, make sure that you see long-term potential. If an area is dying down and losing population over time, this is not considered a safe investment.

Hire the Right Team

The last piece of the puzzle is to have the right team of property managers at your side. Their industry experience and expertise can help increase the profitability of your property. Of course, the wrong team can hurt it.

You need to know that you’re driving the right tenants, setting the right policies (and enforcing them), and minimizing liabilities. As a first-time landlord, there’s a lot to learn. Make sure you have the right team of property managers on your side for the best passive investment results.

Start Investing

Now that you know why passive real estate investing is such a good investment, why wait? You can start shopping for the right property today and start earning passive income as soon as possible. Just remember to get the right help.

Stay up to date with our latest real estate investment tips, and don’t hesitate to contact us with any questions or for help with your property.