How the Pros Generate Passive Income through Real Estate Investing

The number one reason individuals invest in real estate is to build an income stream. The scope of the stream can vary widely from person to person - from a “hobby” side income to a full-time, active or passive income. But let’s face it, who doesn’t dream of being able to generate a substantial full-time (or more!) passive income?

One of the best ways to get started is by examining the practices and habits of those that have gone before you. Here’s some wisdom from these real estate investing pros from which you can learn, grow, and be inspired as you embark on building your own passive real estate investment empire.

Mark Ferguson, Built his passive income empire through rental properties

“My rental properties are typically purchased from $80,000 to $135,000 and produce $1,200 to $1,500 in rent every month. Some properties need repairs and some are almost ready to rent when I buy them. I also buy my properties below market value, which has greatly increased my net worth over the last four years. The great thing about investing in real estate is my rents and income go up with inflation. The biggest challenge for most people who want to buy rentals is figuring out what is a good deal, what rents are and if they are making a good investment. I help people figure all of that out and save a lot of time with my Complete Blueprint to Successful Real Estate Investing.

Another way to reduce the work needed when buying rental properties is to buy turn-key properties. Turn-key rentals are already repaired, already rented and already managed by a property manager. Buying a turn-key rental property is as easy as talking to a turn-key rental property about what they have in inventory, picking one and setting up closing. I would still complete due diligence on any turn-key rental property provider to make sure they are a good company. I am considering buying a turn-key property myself and I discuss the process here.

When you buy a turn-key rental property you are saving a lot of time and work, by letting the turn-key company complete the repairs, find the property and manage the property. You are giving up equity in the property over buying one yourself, because you aren’t doing any of the work. You have to decide if the time you save is worth the equity you give up. Typical returns I have seen on turn-key properties have been in the 10 percent range.” [source]

- Read more from Mark on his website, InvestFourMore.

Dale Degagne, Retired-at-28 + full-time world traveler thanks to investment properties

“...before jumping into the real estate game, [former plumber] Degagne says investors should consider three keys to success:

1. Pay off the mortgages. “Assuming you purchase property that is profitable from the start, not having a mortgage every month can significantly increase your profit," Degagne says. "I know for me, [my profit] will double in 20 years when all the mortgages are paid off.”

2. Hold the real estate for at least ten years and keep good books. “In real estate you have good years and bad years, just like you will in any business and almost any retirement investment strategy," Degagne says. "In a ten-year time frame you should see a) A trend in your real estate -- prices, costs, profit b) What your worst year was, and c) From there you should be able to figure out a solid number that you can rely on. This is by far the most important point.”

3. Have an exit strategy. “This involves planning how [the properties] will be taken care of when you're still alive, but don't want the bother of making any decisions on them," Degagne says. "For this, my suggestion is training someone who will eventually inherit them to make the decisions. Bookkeeping and day-to-day management can always be outsourced. There’s no need to be fixing toilets in the middle of the night at 70 years old.”

- Read more about Degagne in this interview at The Street.

Julie Broad, Recently retired 31-year-old real estate investing millionaire:

“90% of my money and my net worth resides in real estate (even excluding my current home). And yes, I am young – barely in my thirties if you must know! I am also a millionaire and it’s all thanks to real estate. It’s not to say that stocks won’t make you rich, Warren Buffet is one extreme example of the wealth that can be created through stocks, but I like real estate because:

1. You Can Kick It! Real estate is tangible. You can drive by a property and tell your friends or family that it is your property. You can also check up on how it’s doing. That is not as easy if you just own shares in a company. There’s nothing to show your friends and family, and most company’s won’t let you sit in on their meetings to see how they are doing!

1. Leverage: If you have $16,000 to invest (which is what I started with 7 years ago), you can buy $16,000 worth of stocks and bonds. But, if you buy real estate, you can buy a property worth $160,000 (which is exactly what I did). While some stock investors are able to buy on margin (when you only put down a portion of what the stock is worth), this is a sophisticated and high risk move that only experienced stock investors typically make.

1. If your stocks go up in value by 5%, you’ve made $800. But if your property goes up by 5% you’ve made $8,000! This is on the same $16,000 investment. This doesn’t even take into account the other ways you can make money from real estate….which leads me to my third reason I love real estate. [source]

Read more of Julie’s tips at My Wife Quit Her Job.

And don’t forget to visit Durise when you’re ready to start building your global real estate investment portfolio. You can get started with an investment as low as $1,000.