Passive income sounds like a sweet deal. You set something up, then you sit back and let the money roll in. You can be an author and collect royalties. You can invest and make money off of interest. You can set up an ad campaign on your blog and earn income every time someone clicks on one of the ads. You can be a landlord and rent out property, and this is one of the more popular passive income options.
These are only a few ways in which you can generate passive income, but they all have one thing in common. Do you see it? They all require some form of initial investment. The author has to write the book. The investor has to have money to invest. The blogger has to build a high trafficked, well-maintained blog. Finally, the landlord has to have property to rent out. This means you have to buy property (and probably fix it up). If you want to pursue this popular form of passive income, you should take the time to learn what is involved.
Becoming a Landlord
You might want to become a landlord, but you might not have the cash required to get things started. You have to find property, and you have to make sure you have good enough credit or enough savings to actually purchase the property. You have to repair the property, if needed, and you have to pay the mortgage while you do this and while you look for a tenant. You have to find good tenants who will pay on time and who won’t cause excessive damage to your property. Once you have tenants, you have to maintain the property. If the water heater goes out, the tenants will be calling you. When the tenants leave, you will have to clean and fix up the property and start the process of finding new tenants all over again.
Wow, this doesn’t sound like a very passive process does it? All of these things require time and money, and you might not have enough of either to get the process rolling.
Consider a Merger
If you don’t have the time or money to get started, but you still want to invest in this form of passive income, you should consider a merger. A merger will let you achieve more than you could by yourself. So, find a friend or a relative who is also interested in this and create a partnership. Businesses do this all the time, just check out this rumored merger between two office supply giants: Office Max and Office Depot. You don’t have to be a big business for this idea to work for you!
The benefit of a merger is that you have enough money to start generating income. The drawback is that you have to split this newly generated income with someone else. It’s important to define everyone’s role from the very beginning, and you might want to consult a lawyer about drawing up a contract. You will want to decide who contributes what in terms of finances, and who does what in terms of property management. Will you hire a property manager? Will you be in charge of finding tenants while your partner is in charge of repairs? These are all important things to consider.
Whether you decide to go it alone or to work with a partner, renting out property can be a very lucrative venture, and if you’re smart, it will not take much of your time or energy. If you want some insider tips on managing your rental properties efficiently, check out this article.
What About You?
Do you own rental property? How is it going? How did you get started?
Photo courtesy kirstyhall