Passive income is money that you earn regularly without having to work for it actively. Real estate investing can be a great way to generate consistent passive income and build long-term wealth. If you’re looking for passive income ideas, here are the key steps to get started in real estate:
1. Get Educated
Before diving into real estate investing, take time to educate yourself thoroughly. Read books, listen to podcasts, and take courses to understand the fundamentals. Learn the different ways you can invest in real estate:
- Rental properties: Buying and managing rental properties like single-family homes, apartments, etc. Requires hands-on work as a landlord.
- REITs: Real Estate Investment Trusts allow you to invest in large-scale commercial properties as a shareholder. A passive way to diversify but offers limited control.
- Crowdfunding: Platforms like Fundrise allow you to buy shares of a rental property along with other investors. More passive but higher fees.
- Syndications: Pooling capital with other investors to buy commercial real estate overseen by a sponsor. Very passive with potential for high returns.
Join communities of like-minded investors to gain knowledge from their experience. Resources like those found in the Left Field Investors Library offer a wealth of free information to help you learn.
2. Determine Your Investment Strategy
Based on what you learn, determine what path of real estate investing best fits your financial goals, timeline, skillset, and budget.
Real estate syndication allows you to invest in larger commercial properties without being the landlord. A skilled general partner oversees everything, enabling a limited partner to invest passively. Syndications provide portfolio diversification, professional management, and potential for higher returns compared to owning rentals directly.
3. Find the Right Investment Opportunities
Once you know what passive real estate investment strategy you want to pursue, take time to find specific deals that match your criteria.
Vet sponsors thoroughly to find ones with an established track record of success:
- Look for 5+ years experience executing similar deals successfully.
- Ask for references and speak to their current investors.
- Verify they have strong real estate and asset management expertise.
- Ensure your goals and risk preferences align.
Look for opportunities to invest with experienced operators. Evaluate deals carefully based on the business plan, financial projections, market conditions, and your risk tolerance. Conduct due diligence to avoid pitfalls. Learn more about the process of investing in syndications and what to look out for during a deal in this article by Left Field Investors.
4. Start Small and Diversify
You don’t need a huge amount of capital to begin passive real estate investing. Start by deploying small amounts of money into multiple properties to spread risk.
For example, invest $25K into your first syndication, then add another $15-20K into your next 1-2 deals. Pay attention to minimum investment sizes, which often range from $25K-$50K for syndications.
Aim to build a balanced portfolio of 6-8 investments in your first 1-2 years. Diversify across:
- Locations – Invest in properties located in different cities, states, or regions.
- Asset classes – Mix of multifamily, retail, office, industrial, storage, etc.
- Risk profiles – Blend of core, value-add, opportunistic deals.
- Operators – Work with multiple experienced general partners.
- Timelines – Some short-term lending, some long-term holds.
Building diversity protects you from downturns in any single market or asset type.
Be patient as you build knowledge and experience. Reinvest profits to steadily increase your passive income streams. Set a goal like $1,000 per month in passive income within 3-5 years.
Monitor your portfolio’s performance and adjust your investments over time. You may choose to sell underperforming properties to reinvest in better opportunities.
5. Reinvest and Scale
Be patient. As your initial investments become profitable and start generating consistent passive income, reinvest the returns to buy additional properties. Reinvesting returns will allow your portfolio to compound and grow exponentially. With the right reinvestment discipline, you can eventually reach your number for full passive income that covers your living expenses. Keep expanding your real estate investments to grow your passive income streams.
With education, a prudent strategy, patience, and discipline, passive real estate investing can help you achieve financial freedom. Follow these steps to start building real wealth that works for you through real estate. To learn more about the path to passive investing, subscribe to Passive Investing from Left Field podcast on YouTube or become a member of Left Field Investors.