15 Surefire Ways To Generate Passive Income Through Real Estate

Real estate, like other market sectors, is currently dealing with considerable volatility. Despite what you may have heard, real estate investing isn't dead. Far from it, in fact. On that note, here are 15 surefire ways you can generate passive income through real estate, all well worth considering as we near the end of 2022 and head into 2023.

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While investing in physical real estate is a viable way to play this space, single-family homes, apartment complexes, and office buildings are far from being your only options. Plenty of companies are centered around the real estate space but don't own and/or operate the actual properties.

For example, some companies construct residential and commercial real estate properties to capitalize on the long-term potential and returns the real estate space offers. There are also consumer discretionary companies that generate customer sales after a new home has been purchased.

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If you have the capital to purchase a physical home, investors continue to be intrigued by the business model of buying a property to rent out as a means of producing ongoing income. When you buy a property to rent out as a vacation home or short-term rental, you typically charge on a per-night basis and often generate a higher income as a result.

The flipside of operating vacation rentals is that income can be sporadic because you won't have tenants entering into long-term contracts. Depending on the area in which you live and the type of home you have, you may already have space you can rent out. In that case, you could start generating income with a much lower initial investment.

Buying a property to serve as a long-term rental will typically require significant time and money, not to mention sweat equity. However, the durable income you can generate from long-term contracts with tenants can compound your returns many times over. It really comes down to your current financial situation, your risk tolerance in the current market, and the amount of time you have to invest in actively managing a rental property.

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There are plenty of other ways to generate income from real estate besides buying a rental property. Options like crowdfunding platforms and real estate investment groups allow you to pool your capital with other investors and share in the returns produced by various kinds of property. Real estate platforms offer an excellent way to build your portfolio around whatever kind of real estate you're interested in, based on the amount of risk you're willing to take and the capital you have at your disposal.

Real estate syndications are another way to reap the rewards of different types of real estate projects without risking hundreds of thousands or even millions of dollars worth of capital. A real estate syndication includes the sponsor, which is the entity or person managing the project (e.g., building an apartment complex), and a group of investors responsible for putting down money for the enterprise. Typically, investors need to be accredited to participate in these types of ventures.

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Investing in real estate can be as simple as buying publicly traded stocks through your brokerage account. One way to do this is to invest in real estate exchange-traded funds. Real estate ETFs are a popular way to invest in various forms of real estate, often commercial, while earning portfolio returns through share price appreciation and dividend income.

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Real estate mutual funds are another excellent option to consider if you like the idea of owning a group of real estate investments and want to diversify your portfolio more quickly. These types of mutual funds invest in everything from hotels, resorts, and real estate service providers to gaming and hospitality companies, to name just a few. Rather than tracking a particular index's performance, the goal of a mutual fund is to provide market-beating returns over time.

It's no secret that, overall, real estate values tend to appreciate over time, and vacant land is no exception. Investing in vacant land does require a certain appetite for risk, not to mention a potentially significant amount of money to spend on the plot of property.

However, investors can realize generous returns on a vacant piece of land, depending on what they do with it. For example, some investors may choose to lease it out to local farmers, use it to harvest timber, or sell it to a developer.

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Whether you have a few hundred dollars or much more, putting your money to work with other investors can be an excellent approach to maximizing the power of your investment while gaining returns from forms of real estate you find most compelling. Online investment platforms are one way to expand your portfolio into real estate, sometimes with an investment of as little as $10. Putting your capital into a private equity real estate fund is another option if you have more capital to work with but don't have the time or desire to manage real estate investment projects on your own.

Equity real estate investment trusts (REITs) are one of the most popular options if you're looking to invest in a fund containing a broad group of assets. An equity REIT can own and manage many different types of properties, and it produces income from renting these properties out to tenants. Since an equity REIT may own everything from multifamily housing to industrial complexes, its tenants can range from private individuals to large public companies.

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Mortgage REITs can come in a few different forms. Many mortgage REITs serve as the actual lenders facilitating mortgage loans and producing income from the interest on those loans, while others purchase the right to service an existing loan from the originator. A mortgage REIT may invest in commercial or residential mortgages and mortgage-backed securities.

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Many REITs are publicly traded. This makes purchasing them as easy as searching for the ticker you want and hitting the buy button in your trading platform of choice. Publicly traded REITs can not only grow their share prices over time to generate investor returns but also pay out regular dividends. And that makes them a favorable investment in many different market environments.

While many REITs are available for purchase like regular stocks, not all of them are. Individuals who wish to invest in public non-traded REITs will often have to go through investment platforms to access them.

Non-traded REITs offer some tax advantages that publicly traded REITs do not. However, it's important to note that these types of investments typically carry high fees and investment minimums and, in some cases, are available only to accredited investors.

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Unlike publicly traded and public non-traded REITs, private REITs are not obligated to generate the same audited financial data or conform with the registration requirements of the U.S. Securities and Exchange Commission. Most private REITs are geared toward investors with substantial capital to spend.

Compared to public REITs, private non-traded REITs tend to generate higher returns in the form of dividends. They also don't carry the same volatility because they are not traded on public exchanges subject to the whims of market action.

While certainly, a less mainstream way to build your real estate portfolio, investing in mobile home parks isn't a venture to overlook. The combination of an aging population and decreasing affordability of homes has led many to seek mobile homes as long-term residences, creating a durable trend for real estate investors. There are many ways to invest in mobile home parks, from purchasing a pre-existing community to buying shares of REITs with exposure to this space.

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Some investors have soured on real estate lately, and at first glance, that's understandable. With fears of a recession, sky-high interest rates, and lower access to capital combined with still-inflated home prices having a cooling effect on markets around the country, you might be wondering whether real estate is still a wise place to put your hard-earned cash.

While short-term factors may indeed signal a slowdown in many sectors of the real estate space at large, that doesn't make this market any less attractive to invest in if you're planning on building your portfolio around a variety of profitable, cash-flow-producing assets over a period of many years.

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