Smart people understand that time is money.
Since there are only a certain number of hours in the day, most of us are severely limited in what we can earn over the course of a month or year.
And if you continue down this line of thinking, you’ll eventually find yourself researching the value in passive streams of income – money that you can earn while doing something else.
The Myth of Passive Real Estate Investing
Let’s be clear about one thing: The idea that you can make a steady stream of income on anything without making some sort of contribution in the form of time or money is totally false. Unless you win the lottery or receive a massive inheritance from a deceased loved one, you’ll have to work for your income in one way or another. However, there are some methods that are more passive than others.
Real estate can be one such method – though this is mostly overblown by internet bloggers who really don’t know what they’re talking about. They act as if you buy a piece of property with little or no money down and then sit back while rent checks pour into your mailbox. News flash: If it were this easy, every single person you know would have rental properties to their name.
So while the notion of totally passive real estate investing is a myth, there’s plenty of truth to the idea that it can be largely hands-off. But in order to do so, you have to be strategic with you how set up these investments.
4 Ways to Make it More Hands-Off
Real estate investing – particularly in the rental property niche – is highly dependent on processes and systems to be efficient and successful.
Here are some examples of systems you can put in place to make your rental property income as hands-off as possible:
1. Smart Real Estate Investments
You make your money when you buy. If you want your real estate investments to be hands-off, do your research and only invest in properties that make financial sense.
You want a home with a good foundation and that’s in a decent location. You also need to carefully crunch the numbers to ensure there’s cushion in your cash flow projections.
2. Comprehensive Tenant Screening
The right property should be paired with the right tenant. If you can fill your rentals with tenants who pay on time and respect the property, you’ll have solved half of the problems landlords have.
Though it’ll take time on the front end, a comprehensive tenant screening process will save you a considerable amount of energy over the life of the lease agreement. Set up a standardized process and tweak it over time to maximize your results.
3. Professional Property Management
“When you’re out there driving around on your days off, doing repairs for tenants, filing evictions, and chasing down late rent checks, your rental income becomes anything but passive,” Houston-based Green Residential explains. “Instead, it becomes hard work that takes you away from your friends, family, and your life. And sometimes, it can even become an expense if you’re spending more on repairs than you’re generating in rent.”
The only way to prevent the little day-to-day maintenance tasks and administrative responsibilities from eating away all of your time is to hire a professional property management company to handle these aspects of the business for you. It’ll cost you a portion of your profits, but it’s money well spent.
4. Hours and Boundaries
Tenants do have real needs and problems, but if you’re constantly making yourself available to them don’t be surprised if they eventually start to abuse the system.
By setting specific hours and boundaries for contact, you train your tenants to only contact you when there’s an actual issue. This saves you time and frustration.
Putting it All Together
Is investing in rental properties actually a totally passive stream of income? Absolutely not.
Can it be largely hands-off? Certainly.
But in order to enjoy the latter, you have to establish the right systems on the front-end.
Hopefully, this article has gotten your wheels turning, because there’s money to be made. Just make sure you go in with the right expectations!