One of the top dreams of everyone I’m sure of is making not just money, but lots of it without putting much effort. I believe this is your dream too, then I welcome you to the right place.
Investing in real estate means multiplying your wealth and here I am going to show you 5 different strategies to create positive cash flow in the short run and build wealth in the long term with real estate investment.
But first, what do I mean by passive real estate investing?
Passive real estate investing is any means that allow you to make money continuously from real estate, with or without owning an investment property – while doing little or no work related to your investment.
In a simple sentence, if you invest in real estate, makes money while spending only about an hour or so per month on managing your investment, it is considered passive real estate investment.
5 Best Passive Income Investments in Real Estate for Beginners
1. Investing in Rental Properties
Ever heard of the popular saying; “landlords grow rich in their sleep”?
With rental properties done right, you are on your way to multiplying your wealth and this transcends you. Like myself, I am still collecting rent from a property my grandpa built. He’s gone, my dad is gone and the property still remains and keep churning rental income for us the children.
One key factor to consider with this strategy, however, is the location. Though no location is bad, the more developed the area is the higher your rental income and the fastest you recover your investment.
The top mistake most Nigerians make is thinking they need a lot of money to venture into rental properties. However, they forgot that Rome wasn’t built in a day. To own a rental property, you first need to buy a land. Buy that land first, then you can start building gradually and before you know it you’ll be counting multiple homes to your name. This is how I do it myself.
This strategy is the top method billionaires out there use in multiplying their wealth to attain the billionaire level.
2. Buy and Hold Real Estate
I can not overemphasize this enough. This is why I have been glamouring on investing in Ibeju Lekki real estate because it is the new Lagos and early property investors are going to smile in the not-too-far future.
“You don’t wait to buy real estate, you buy real estate and wait”
Because landed properties do appreciate fast, depending on the location, buy land now and hold for some few years. Once there is enough appreciation rate on the land, you can then sell it off.
To make a lot of money using this strategy, you need to keep investing by buying more lands as your budget can take and then sell off once you have enough capital gain.
For example, a particular estate was sold for N2.5m in 2016 and today (2019) it’s selling for N7m. This means early investors who bought in 2016 have gained N4.5m within 3 years without doing nothing – just by buying and holding. How about holding for 2 more years? How much do you think the property will be worth?
One very important thing about this strategy is that, whether you buy or you didn’t buy, you will spend the money anyway and that 5 years will still come and you will blame yourself for not investing 5 years ago.
So, if you have been thinking or being sceptical, start investing now – buy and hold real estate but first, find a reliable realtor who can help you through the process so you won’t fall into wrong hands. You can talk to me and I’ll help you through the investment process – safe and secure!
3. Turnkey Real Estate Investing
One of the easiest ways to start passive real estate investing for beginners is turnkey rental properties. What this implies is, you buy a rental property which is fully ready to be rented out to tenants. This property can either be a newly constructed home or a renovated one and can be either commercial, residential or both.
The interesting part of this method of investing is that some properties might even come with some few tenants already.
Most of these homes are multi-family but a single family home is also a welcome idea. Multi-family homes like a block of flats, terraces or semi-detached duplexes are hotcakes in the Nigerian real estate market, so finding tenants and making back your money shouldn’t be a headache.
However, managing tenancy apartments can be a pain in the neck especially if you are a part-time real estate investor. So, you should hire a property manager to manage your rental properties for you. I think they do charge around 10% commission or so on total rental income annually.
Hot selling buildings list here are a mixture of duplexes, blocks of flats, terraces and other apartments. Check them out here to start your turnkey real estate investment.
However, one thing that hinders most intending investors from going this way is the huge capital involved. I mean, what about those that don’t have up to N50m, N100m or N150m to buy a rental property?
The solution is going for OFF-PLAN. Off-plan property is a type of property that is not yet built but is already for sale.
This is what I mean, some developers have the necessary requirements like the land, 3D drawings and building plan approval all set, then they need investors to come and invest and then they (the developers) build for the investors and deliver the house at an agreed time frame. These type of properties are usually multi-family properties such as blocks of flats and terraces.
These type of properties come affordable and you can even decide to pay in instalment, e.g. spreading payment for up to 12 months and having your property in the next 6 months or so according to the agreement between you and the developer.
Mind you, to be successful with this method, you must be careful and make sure you are dealing with a reputable developer.
One good turnkey rental property on off-plan is Gracias Residences Moonstone. It consists of 1 bedroom selling for N7m and 2 bedroom selling for N8m, and you can spread this payment for up to 12 months. After 70% of payment, you will be handed your flat keys.
This is a great way to get started with turnkey rental properties without breaking the bank.
4. Real Estate Syndication
This method of making passive real estate income is a delicate one and thus care should be taken in choosing your syndicates. A real estate syndicate, which consists of various investors, is headed by a sponsor who plays a vital role in this investment strategy.
The sponsor, also a syndicator, will be responsible for finding investment properties for sale, pulling financial resources of all the investors involved, buying the rental property and providing the long-term rental property management.
The real estate investors, on the other hand, invest their money in order to finance the purchase of the investment property and then receive passive real estate income which will be shared among all investors.
For example, at the moment I have a 4 semi-detach duplex for sale in the Lekki corridor at the rate of N55m.
Then 5 investors can invest in the property by investing N11m each to buy this duplex.
This duplex rent goes for N2.8m annually.
Now to the math…
After deducting the property manager’s commission on N2.8m, which is N280,000 – we are left with N2,520,000 per annum.
This is to be shared by 5 investors every year = N504,000
Earning N500k every year from an investment of N11m is way better than saving that money in the bank; just a little lower than bank’s interest and most importantly, inflation has no effect on the property.
However, looking at the current figure, you may be wondering it will take you about 20 years to recover your capital. But considering the rate of increase in rent every year, it will be reduced to maybe 15 years or so. But note that even after recovering your investment capital, this property will be generating passive income to all investors involved, from generation to generation.
You can even decide to sell off this property, say, in 10 years time and then share among all 5 investors. In 10 years, how much do you think the property would worth? N80m? N100m? or higher? After earning N5m for that 10 years, you are sure of getting back double of your investment capital.
However, this method of investment should be established as a corporation or a limited liability company so that each of the investors will be protected and to live after them.
If you are a beginner real estate investor with some cash but not much free time, consider syndication as one of the available passive income investments.
5. Renting Out a Room in Your House
You want to make money from real estate but you don’t have enough capital just yet to buy a rental property? Rent out a room in your own house and make residual income from it. While you may be thinking of having some privacy in your own home, you can actually reconstruct the rooms to have a separate entrance and make it standalone.
Typically, if you have a home without tenants, then your home is not considered an asset. But if you want to make your home send you residual rental income, you can converts some rooms in your home so they have a separate entrance from the main building and rent them out.
Or if you have a big compound, you can as well build some self-contained rooms as a form of BQ and rent them out to tenants.
The drawback of this passive income strategy is that you need to be very careful when taking in tenants because some tenants can be a pain in the neck.
But on the plus side, renting out a room or two in your house is an excellent way to get a taste of being a landlord and at the same time a real estate investor.
Now you know, contrary to popular belief, that real estate investment doesn’t have to require much time and efforts.
From the above listed 5 common ways to make passive income from real estate investing, you will agree with me that the best way to grow and multiply your wealth is investing in real estate. And by doing this, you may or may not own an investment property before making a lot of money from it.
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