7 Ways to Make Passive Income with Real Estate in 2019

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One popular way to make passive income these days is through real estate investing. And you might be surprised to learn something.

You don’t have to own a brick and mortar property to be a real estate investor.

Yes, that is an option. And owning traditional brick and mortar properties can be a passive income source if you do it right. However, there are also other ways you can make passive income via real estate investing.

Making Passive Income with Real Estate

The investment world has changed regarding real estate investing. That means that you are not limited to owning residential or commercial rental properties firsthand.

If you want to make money with real estate investments, there are other choices. One such option is crowdfunded real estate investing.

Crowdfunded real estate companies are similar to today’s peer-to-peer lending companies. Like Lending Club and Prosper, they offer a platform that matches real estate investors with investment choices.

They help people looking to invest money in real estate in a passive manner. Also, investors can avoid bargaining with sellers. No need to get involved in the transfer of ownership and management of those properties either.

Crowdfunded platforms such as these are a great way to make passive income in real estate. You can do so without investing hundreds of thousands of dollars as the sole owner of a property.

In addition, you forego the time-consuming work that direct property owners often have to do.

Note that crowdfunded real estate investing is available to two groups of people. Those groups include accredited investors and non-accredited investors. Later we’ll explain the difference between the two.

Now we’ll talk about four different crowdfunded real estate investment companies. Each company works a bit differently. And all have distinct criteria for investors to meet.

Crowdfunded Real Estate Investment Minimums

These four crowdfunded real estate investment companies are among the most experienced. They each have different minimum investment quotas for investors.

CompanyMinimum Investment 
Rich Uncles$5Sign Up
Fundrise$500Sign Up
Realty Mogul$1,000Sign Up
stREITwise$1,000Sign Up
Equity Multiple$5,000Sign Up
RoofstockvariesSign Up
CrowdStreet$10,000Sign Up

Here are more details for each of these companies:

1. Rich Uncles

Rich Uncles is another way to get started in crowdfunded real estate investing. With Rich Uncles, you can buy shares of a REIT for student housing for as little as $5.

This low investment amount makes it easy for almost anyone to get started investing.

How it Works

Rich Uncles uses crowdfunding to make real estate investments available to everyone. They have commercial properties and student housing properties in their REIT choices. You can choose to invest in one or both of their two REIT choices.

The BRIX REIT

Rich Uncles’ BRIX REIT focuses on student housing. They buy properties to house college students. The company chooses properties located within a one-mile walking distance of major universities. Also, the minimum to invest in the BRIX REIT is just $5.

The NNN REIT

Rich Uncles’ NNN REIT works a bit differently. First of all, it requires a minimum investment of $500. This REIT focuses on office buildings, industrial properties and some retail properties.

The REIT I

The REIT I is available to existing investors with Rich Uncles. This REIT also focuses on office buildings, industrial properties and retail properties.

Both the NNN REIT and the REIT I lease to nationally recognized tenants.

The goal? Lease these properties to tenants with strong financial statements and a solid income history. Bonus: there are no fees with Rich Uncles. They’ve cut out the middleman to save you money.

Who Can Invest?

You don’t need to be an accredited investor to invest with Rich Uncles. However, Rich Uncles does ask you to agree that you have a minimum $75,000 family income or $250,000 net worth.

What Else Should I Know?

Investing with Rich Uncles can save you money over other forms of investing because there are no broker fees. Also, dividends get paid on a monthly basis. You can take them as cash or reinvest them; the choice is yours.

Rich Uncles can be a great choice for the beginner real estate investor because of its low minimum investment. And the “no fees” feature is attractive as well.

Click here to see our full review of Rich Uncles.

2. Fundrise

Fundrise is an online real estate investment platform that was founded in 2010. Fundrise has a minimum investment requirement of $500. They focus on commercial property investment in the form of what they call eREITs. An eREIT is a hybrid of an exchange-traded REIT (real estate investment trust) and a non-traded REIT.

We talked about REITs in the section on Rich Uncles as well, and we’ll get more into detail about REITs later on.

For now, the important thing you need to know about Fundrise and its eREITs is the cost savings. The Fundrise eREIT has low fees. And that is one of its main benefits to you as an investor.

Traditional REITs can come with really high fees, sometimes as high as 15% or more. However, Fundrise’s eREIT comes with an annual management fee of just 1%.

And like many non-traded REITs, Fundrise’s eREIT doesn’t fluctuate with the stock market. This makes it less vulnerable to stock market fluctuations. Sometimes those fluctuations have little to do with the real estate market in general.

How it Works

Investors who want to invest with Fundrise get to browse through their list of eREIT investment funds. They can choose which one(s) are most suitable for them.

Fundrise’s eREIT offerings have a goal of offering successful REITs for every investor. Also, they work to cut out the middleman. Middlemen such as stockbrokers make money by charging investors fees. Instead, Fundrise makes sure that their REIT profits go directly to the investor.

Who Can Invest with Fundrise?

Fundrise is different from some real estate crowdfunding companies in one major way. To explain, you don’t need to be an accredited investor to invest with them. Also, as mentioned earlier, they have a minimum investment threshold of $500. This amount is lower than many other companies. So it’s affordable for almost every level of investor.

Click here to see our full review of Fundrise.

What Else Should I Know?

When you purchase an eREIT product from Fundrise, you’re not going through a broker. Instead, you’re purchasing directly through the issuer of the trust.

This is what allows Fundrise to charge such low fees. They describe each offering in detail on their site. Also, investors get notified when new assets are added to the eREITs they are invested in. They have four different eREITS currently available for new investors.

  • Starter Portfolio
  • Supplemental Income Portfolio
  • Balanced Investing Portfolio
  • Long-term Growth Portfolio

As a part of the Fundrise investor team, you can invest in one, two or all of the eREITs the company offers.

3. Realty Mogul

With Realty Mogul you typically invest in real estate by purchasing shares of stock in one of their LLCs. The LLC then invests in another LLC that holds title to the property. Realty Mogul runs the business in this manner to minimize overhead. It also provides investors with access to more investment choices.

They have a minimum investment requirement of $1,000.

How it Works

As I mentioned, you’re typically buying stock shares with Realty Mogul. They have a wide variety of investment properties they buy, including:

  • Multi-family dwellings
  • Office buildings
  • Self-storage facilities
  • Medical buildings
  • Industrial sites
  • Single-family investments

And more. Realty Mogul offers loan investments as well as equity investments. The term on loan investments generally runs 6 to 12 months. Conversely, equity investments are longer term – between 3 and 10 years. These types of investments are available to accredited investors.

The company also offers REITs that non-accredited investors can participate in. One of the Realty Mogul REITs focuses more on multi-family dwellings. The other offers a variety of commercial properties.

Who Can Invest with Realty Mogul?

Realty Mogul allows accredited investors as well as non-accredited investors. Note that non-accredited investors can only invest one of Realty Mogul’s REITs. They have MogulREIT 1 and MogulREIT 2 to choose from if you’re a non-accredited investor.

As an accredited investor, you can invest in any offering you choose.

What Else Should I Know?

Account fees with Realty Mogul run between 0.50% and 0.60% per year. Profits get distributed monthly or quarterly. Realty Mogul has a complicated vetting process. And they end up approving only about 10% of the deals they’re offered. In other words, they won’t lend money to just anyone. This is good for investors like you and me.

4. stREITwise

stREITwise is a crowdfunded-type REIT that manages commercial real estate. As a real estate investor with stREITwise, you get access to a professionally managed portfolio of private real estate assets.

However, you can do that at a much more affordable level. The minimum investment with stREITwise is just $1,000.

How it Works?

If you invest in stREITwise, your initial investment is held for at least one year. Afterwards, you are able to redeem shares on a quarterly basis.

Investments are made primarily in office buildings and mixed use buildings. To date, the stREITwise REIT has shown average annual returns of ten percent.

Dividends are paid out on a quarterly basis and can be reinvested or taken as passive income.

Who Can Invest?

Investments are open to both accredited and non-accredited investors. However, non-accredited investors are subject to stREITwise investment stipulations.

As a non-accredited investor with stREITwise, you must invest less than ten percent of your total net worth. The net worth number can’t include your home.

Also, you have to invest less than ten percent of your annual income as well. These rules are in place to protect non-accredited investors from over-investing.

What Else Should I Know?

There is an upfront 3% fee and an ongoing 2% annual management fee. All fees are taken out before dividend distribution.

While these fees might seem high, they’re really not. In fact they’re lower than what many REITs charge. The difference is that stREITwise is open and honest about their fees.

You won’t find hidden fees here.

5. EQUITYMULTIPLE

EQUITYMULTIPLE helps investors take part in professionally managed commercial real estate. They offer privately held REITs to accredited investors.

How it Works

As I mentioned, you must be an accredited investor to invest with Equity Multiple. Their minimum investment amount is $5,000. They typically look for properties that are:

  • Commercial properties in thriving markets with current cash flow
  • Short-term loans and preferred equity investments
  • Value-add projects with construction components and more aggressive business plans

They select less than 10% of the deals they’re offered. In addition, they perform full due diligence before offering deals to investors.

Who Can Invest?

Again, only accredited investors can open an account with Equity Multiple. And you must have a minimum deposit of $5,000 to invest.

What Else Should I Know?

Equity Multiple charges a 0.5% annual service charge fee. Also, they take 10% of all profits. They also have a 24/7 customer service center for investors. Their investment properties are large commercial properties they find through experienced lenders with low default rates.

6. Roofstock

Roofstock isn’t a crowdfunded real estate investing company. Instead, they make it easier and less expensive for you to own rental properties.

How it Works

If you’re an accredited investor, you can invest in multiple properties via equity investments. However, Roofstock’s main goal is to make owning rental properties super easy.

All of their available rental homes are listed online. You browse the homes and choose which one(s) you want to buy.

They share the price, neighborhood statistics, cash flow potential and more. Roofstock even takes care of property management for you.

Once you choose a home, Roofstock arranges financing, closing and all other details. After you’ve closed, rental income starts coming in.

Who Can Invest?

Both accredited and non-accredited investors can buy through Roofstock. There’s no minimum investment required, however when buying properties you will need a down payment.

What Else Should I Know?

It’s free to make an offer, but after your offer is accepted Roofstock charges a fee. The fee is 0.5 percent of the offer or $500, whichever is higher.

Also, when purchasing properties through Roofstock, you’ll need 20-30% of the purchase price as a down payment.

7. CrowdStreet

CrowdStreet was formed in 2014 by a team of experts in commercial real estate, private equity, software development and online marketing. They specialize in commercial real estate investing.

They offer both equity and debt investment deals to investors. In addition, CrowdStreet offers comprehensive documentation on all real estate deals before and during the investment process.

How it Works

With CrowdStreet, you don’t buy shares in a real estate mutual fund or invest in a company that owns dozens of properties.

Instead, you buy a stake in specific properties you choose, based on the investment information shared on CrowdStreet. CrowdStreet connects you directly with real estate developers.

CrowdStreet provides you with comprehensive information on available properties so you know the details of the deal. Their website has training information as well, for investors who are new to real estate investing.

Who Can Invest?

CrowdStreet is only open to accredited investors. The minimum investment amount is $10,000.

What Else Should I Know?

The minimum investment length with CrowdStreet is 36 months. Some investments go up to 360 months.

There are no fees when you invest with CrowdStreet. Their real estate developers (called sponsors) pay all fees.

In addition, you can use your self-directed IRA to invest with CrowdStreet.

What is an Accredited Investor?

Some investment firms only allow accredited investors to participate. An accredited investor has to meet certain financial criteria. These companies are more strict about who they allow to invest with them. To clarify, they want to protect investors.

Accredited investors must meet one of two criteria:

  • They must have a single income of at least $200,000 or a joint income (with spouse) of at least $300,000. The income minimums must have been met for the last two years, and be expected to continue in the current year.
  • The investor must have a net worth of $1 million or more, excluding their primary residence. Their net worth figure can be sole savings and investments or joint with spouse.

If you meet one of the two criteria detailed above, you’re considered an accredited investor. If you don’t, you’re considered a non-accredited investor.

Non-accredited investors don’t have as much money as accredited investors. Therefore, an investment loss would be much more impactful. So this is why some investment companies only allow accredited investors.

But as I mentioned, real estate investment options are available to both accredited and non-accredited investors.

Now let’s talk a little bit more about what these companies invest with: REITs.

REITs

A REIT (real estate investment trust) is a type of passive real estate investment income. A REIT is similar to a mutual fund. It houses a variety of different investments within each fund. The difference is that REIT investments are all encompassed in real estate.

For instance, a REIT might include ownership of several different investment types:

  • Commercial office buildings
  • Shopping malls
  • Timberland
  • Warehouses.

This is just to name a few. There are many other types of real estate properties the REIT can house. It’s riskier to invest in just one single real estate investment, such as owning a rental home. So the variety of investments in REITs means less risk for an investor. With the REIT, you don’t have all of your eggs in one basket.

As I mentioned earlier, REITs can be exchange-traded, non-traded or private. You can purchase exchange-traded REITs through any broker. They’re registered with the SEC (Securities Exchange Commission). And they file regular reports with the SEC. Also, they’re listed on national securities exchanges such as the Nasdaq or the NYSE.

But there is one downside to the exchange-traded REIT. Chiefly, its performance can mimic the performance of the exchange it’s listed on. For example, let’s say a REIT is listed on the NYSE. If the NYSE plummets, the REIT value could plummet too.

Non-Traded REITs

A non-traded REIT works a bit differently. Like an exchange-traded REIT, a non-traded REIT is listed with the SEC. It also files regular reports with the SEC. However, non-traded REITs are not listed on an exchange and are not publicly traded.

This makes a non-traded REIT what is called an illiquid asset. An illiquid asset is tougher to liquidate than a non-traded REIT. However, both types of REITs are indeed passive forms of real estate investing.

Private REITs are a third option. These investments are not listed with the SEC and do not file reports with the SEC. They can be riskier than the other options simply because there are no connections with the SEC.

Traditional Real Estate Ownership

Traditional real estate ownership can also be passive – when done right. When you own traditional real estate, you typically have two choices. You are generally choosing to own either residential real estate rentals or commercial real estate rentals.

However, you could also own farmland, timberland or other types of real estate you can rent out.

If you choose to own traditional real estate directly, know that someone will have to manage the properties you own. Tenants will call, having questions about the house. Or they might call to notify you of necessary repairs.

You’ll need to perform maintenance and upkeep on the property. And tenant applications will require your attention. Background checks and employment checks will have to be done. Plus, you’ll need to collect and deposit rent money.

Using a Property Management Company

As you can see, traditional real estate ownership can be far from a passive income source. But you could make it more passive by choosing to hire a professional management company. They do the work of finding and managing tenants. Also, they collect rent checks and repair and maintain the property for you.

Good property management companies are available in most major urban areas. If you can find one, it’s a great way to turn a directly owned real estate investment into a passive income source.

However, it’s important to know that management companies will charge a fee to manage your property. There are lots of property management companies in the major urban area where I live. But they generally charge ten percent of the monthly rental income to care for and manage the property.

In other words, let’s say the rental rate you charge for the property is $1,200 per month. You can expect to pay a property management company $120 per month. This is their fee to help make your investment a passive income investment source.

It’s important to know the amount of money a property management company will charge each month. Check that out before you purchase a real estate investment property directly. Reason being is because that expense will impact your bottom line. It affects what – if any – profit you will make each month on the property you purchase.

Does Your Property Cash Flow?

Know what your exact bottom line profit could be to make sure your property cash flows. A property “cash flow” is when the incoming rent outweighs the outgoing expenses. Expenses on rental properties include taxes, repair, maintenance, property management fees, etc.

One factor that helps determine whether an investment property is a good investment is cash flow. If you have a positive cash flow each month after expenses, the property is less risky.

Summary

There is a variety of different options out there for real estate investing. So this means nearly anyone can become a real estate mogul.

Learn to know the details of the different real estate investment options available to you. Work through those options to decide which one is best for you. By doing so, making money through real estate is a viable investment choice.

Have you decided after thorough research that passive real estate investing more suitable for you? Is it a better fit than traditional ownership and management? If so, consider one of the options listed above as your potential source for passive investment income.

Thanks to today’s crowdfunding companies, you can invest in real estate on almost any budget.

Disclaimer

For example, a three-year $10,000 loan with a Prosper Rating of AA would have an interest rate of 5.31% and a 2.41% origination fee for an annual percentage rate (APR) of 6.95% APR. You would receive $9,759 and make 36 scheduled monthly payments of $301.10. A five-year $10,000 loan with a Prosper Rating of A would have an interest rate of 8.39% and a 5.00% origination fee with a 10.59% APR.

You would receive $9,500 and make 60 scheduled monthly payments of $204.64. Origination fees vary between 2.41%-5%. APRs through Prosper range from 6.95% (AA) to 35.99% (HR) for first-time borrowers, with the lowest rates for the most creditworthy borrowers. Eligibility for loans up to $40,000 depends on the information provided by the applicant in the application form.

Eligibility is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All loans made by WebBank, member FDIC.

3 COMMENTS

3 responses to “7 Ways to Make Passive Income with Real Estate in 2019”

  1. Anand Rana says:

    First and foremost, select the right location. Then, check if it is easy to maintain. Then check the metrics, like Net Operating Income, Capitalization Rate, and Cash on Cash. Here you are with the best list of things to do.
    That’s a great post though!

  2. Rickey Braud says:

    I like to invest, I just have very little money.

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