Real estate investing has become increasingly popular in recent years. One of the reasons for this is the ability to generate passive income. Passive income streams are a great way to create long-term wealth with minimum effort and involvement.

As someone who has invested in real estate for passive income, I can attest to the benefits of this investment strategy. I remember purchasing my first rental property and feeling both excited and nervous about the prospect of being a landlord. However, as time went on, I found that the passive income generated from my rental property allowed me to achieve financial stability and freedom. I was able to use the rental income to pay off the mortgage on the property and generate a steady stream of passive income each month. It was a great feeling to see my investment grow over time and know that I was securing my financial future.

In this article, we’ll explore how you can build passive income streams as a real estate investor.

Understanding Passive Income

Before we dive into the different ways you can generate passive income as a real estate investor, it’s important to understand what passive income is. Passive income is money that you earn without actively working for it. In other words, it’s income that you earn passively with minimal effort and involvement.

Strategies To Generate Passive Income

1. Rental Properties

Rental properties can provide a steady stream of passive income through rent payments from tenants. To generate passive income from rental properties, investors should aim to purchase properties with positive cash flow, meaning the rent income exceeds the expenses associated with the property. Additionally, investors can hire a property manager to handle day-to-day operations, freeing up their time and allowing for truly passive income.

2. Real Estate Investment Trusts (REITs)

REITs are a passive investment option that allows investors to purchase shares in a company that owns and manages a portfolio of income-producing real estate properties. The income generated from these properties is then distributed to shareholders in the form of dividends. To earn passive income through REITs, investors can purchase shares through a broker or online investment platform.

3. Crowdfunding

Crowdfunding platforms allow investors to pool their money with others to invest in real estate projects, typically with lower investment minimums than traditional real estate investments. Investors can earn passive income through crowdfunding by receiving a portion of the income generated by the property, such as rental income or profits from a property sale.

4. House Hacking

House hacking involves living in a property and renting out a portion of it to generate passive income. This strategy can be particularly effective for those looking to purchase their own home, as the rental income can offset the cost of the mortgage. To earn passive income through house hacking, investors should ensure the rental income exceeds the expenses associated with the property.

5. Short-Term Rentals

Short-term rentals such as Airbnb can be a lucrative way to generate passive income, particularly for those with properties in desirable locations. To earn passive income through short-term rentals, investors should ensure their rental rates are competitive, provide excellent customer service, and maintain a well-appointed and well-maintained property.

6. Flipping Houses

Flipping houses involves buying a property, fixing it up, and selling it for a profit. While flipping houses requires more work than some other strategies, it can still generate passive income if investors hire a team to handle the renovations and sale. To earn passive income through flipping houses, investors should aim to purchase properties with high potential resale value and minimize their time spent on the renovation and sale process.

7. Commercial Real Estate

Commercial real estate investments can provide passive income through leasing the property to tenants. To earn passive income through commercial real estate, investors should aim to purchase properties with desirable locations and solid tenant bases and hire a property management company to handle day-to-day operations.

8. Private Lending

Private lending involves lending money to other real estate investors for their projects. To earn passive income through private lending, investors should ensure the borrower has a solid track record, and the loan is secured by the property, and agree on a competitive interest rate and repayment terms.

9. Real Estate Notes

Real estate notes involve purchasing the debt on a property and earning passive income through interest payments. To earn passive income through real estate notes, investors should ensure the borrower has a solid track record, the property has a desirable location, and agree on a competitive interest rate and repayment terms.

How to Choose the Right Passive Income Stream

Now that you have an understanding of the different ways you can generate passive income as a real estate investor, it’s important to choose the right passive income stream for you. Here are a few factors to consider:

1. Time Commitment

When choosing a passive income stream in real estate, it’s essential to consider the amount of time you’re willing to commit to it. Rental properties and flipping houses require a significant amount of time commitment, as they involve managing tenants, maintenance, and renovations. On the other hand, REITs and real estate notes require very little time commitment, as they involve investing in a company or debt instrument. Consider your lifestyle and how much time you have available to devote to your passive income stream.

2. Upfront Investment 

Another factor to consider when choosing a passive income stream in real estate is the upfront investment required. Rental properties and flipping houses require a significant upfront investment in the form of a down payment and renovations. On the other hand, REITs and crowdfunding require a much smaller upfront investment. Consider your financial situation and how much money you’re willing to invest upfront.

3. Risk Tolerance 

It’s important to consider your risk tolerance when choosing a passive income stream in real estate. Rental properties and flipping houses come with a higher level of risk as they are directly tied to the real estate market and require a significant amount of investment. REITs and real estate notes, on the other hand, come with a lower level of risk as they offer a more diversified portfolio. Consider your risk tolerance and willingness to take on more significant risks for potentially higher returns.

4. Personal Goals

Finally, consider your personal goals when choosing a passive income stream in real estate. Do you want to generate a lot of passive income quickly, or are you willing to take a slower approach? Do you want to be hands-on with your passive income stream, or would you prefer a more hands-off approach? Consider your goals and how your chosen passive income stream can help you achieve them. For example, if you’re looking to generate a lot of passive income (relatively) quickly, flipping houses may be a better option than REITs, which offer more stable returns over time.

Summary

Building passive income streams as a real estate investor can be a great way to create long-term wealth. Whether you choose to invest in rental properties, REITs, crowdfunding, house hacking, short-term rentals, flipping houses, commercial real estate, private lending, or real estate notes, there are many ways to generate passive income as a real estate investor. Consider your personal goals, risk tolerance, and time commitment when choosing a passive income stream, and remember to educate yourself, diversify your portfolio, build a strong team, and be patient.

As I experienced, and while risky, building up passive income streams can be exceptionally rewarding in the long run allowing you to enhance your lifestyle and provide you with financial freedom and flexibility. 

If you find yourself ready to invest in your passive income dreams, you’ll likely need some funding to turn those dreams into a reality. Well, the good news is you are already in the right place! Our team at REI News specializes in finding the most trusted and affordable lenders for real estate investors. Discover your financing optionsby speaking to us today!

NEW YORK (Reuters) – JPMorgan Chase & Co <JPM.N>, the country’s largest lender by assets, is raising borrowing standards this week for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption.

From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value.

The change highlights how banks are quickly shifting gears to respond to the darkening U.S. economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession.

“Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Amy Bonitatibus, chief marketing officer for JPMorgan Chase’s home lending business, told Reuters.

The bank was the fourth largest U.S. mortgage lender in 2019, according to industry publication Inside Mortgage Finance.

The changes should help JPMorgan reduce its exposure to borrowers who unexpectedly lose their job, suffer a decline in wages, or whose homes lose value. The bank said the change will also free up staff to handle a surge in mortgage refinance requests, which are taking longer to process due to staff working from home and non-essential businesses being closed.

Refinancing requests jumped to their highest level in more than a decade last month as average rates on 30-year fixed-rate mortgages, the most popular home loan, fell to near record lows, according to data from the Mortgage Bankers Association (MBA).

JPMorgan would not disclose the current minimum requirements for its various mortgage products, but the average down payment across the housing market is around 10%, according to the MBA.

The new credit standards do not apply to JPMorgan’s roughly four million existing mortgage customers, or to low and moderate income borrowers who qualify for its “DreaMaker” product, which requires a minimum 3% down payment and 620 credit score.

The U.S. housing market had been on a steady footing earlier this year, but with a deepening recession and would-be home buyers unable to view properties or close purchases due to social distancing measures, the health crisis now threatens to derail the sector.

The residential mortgage market is already under strain after borrower requests to delay mortgage payments rose 1,900% in the second half of March, Reuters reported.

The National Association of Realtors last month said home sales could fall by around 10% in the short-term, compared to historical sales for this time of year. A Federal Reserve March consumer survey said home prices were expected grow 1.32% over the year, the lowest reading since the survey began in 2013.

https://www.yahoo.com/finance/news/exclusive-jpmorgan-chase-raise-mortgage-221128934.html

Highlights from this housing report:

• Will the real estate market crash in 2020 due to a shaky economy?
• That’s one of the most common questions we received last week.
• At this point, it seems unlikely that the housing market will “crash.”
• But home prices might drop in some cities, especially the pricey ones.

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From stock market investors to home buyers, it seems everyone has the jitters lately. And that’s understandable. Turn on the news, any news, and you would think the world was ending. (Spoiler alert: it’s not.)

The coronavirus has shaken the global economy, causing concerns among international corporations and small businesses alike. And those concerns are warranted. 

The biggest problem in the economy right now is restricted movement. Many countries have imposed travel restrictions and “lockdown” protocols to reduce the spread of the virus. That hurts all kinds of businesses, from restaurants to airlines to hotels — even your local coffee shop.

The bottom line is that we will get through this, as we have in the past. But there will certainly be a short-term impact on the world’s economies. How much of an impact is anyone’s guess. It’s just too soon to say.

But let’s turn our attention back to the housing market for a moment. Let’s tackle the big question…

Will the Real Estate Market Crash in 2020?

Will the U.S. real estate market crash in 2020, due to economic concerns spawned by the coronavirus?

That’s a hard question to answer at the moment, mainly because we don’t know how long the situation will drag on. That’s the key factor here — the duration of the crisis. But as of right now, it seems unlikely that we will see a nationwide housing crash on the scale of the one we saw in 2008.

What’s more likely is that the real estate market will slow down, as fewer and fewer home buyers venture out to buy houses. This in turn could lead to slower home-price growth going forward, or even a decline in some areas.

The housing markets most susceptible to falling home values are the ones with the highest prices relative to median income. Markets like those in the San Francisco Bay Area, where only a small percentage of local residents can afford to buy a house, are more likely to see a downturn compared to the more affordable markets with a higher percentage of capable buyers.

According to George Ratiu, a senior economist at Realtor.com, an economic slowdown could also result in fewer home sales nationwide and a buildup of inventory. In a recent Bloomberg article, Ratiu said:

“If there is a marked economic slowdown accompanied by job losses, that would put a lot of pressure on homeowners. We would see a change in the inventory situation. Instead of a severe shortage, you would start to see inventory ramp up as people get interested in offloading.”

But the fact is, we’re not there yet. All of these outlooks are speculative at this point. Possible, but speculative. We haven’t reached that turning point, at least not on a national scale. And we might not reach that point. A lot depends on how quickly health officials can get their arms around this virus.

House Values Continue to Climb in Most U.S. Cities

According to the latest data, home prices in most U.S. cities are still rising as we approach spring of 2020. And at least one forecast sees that trend continuing over the coming months.

As of March 16, the real estate information company Zillow had the following forecast posted on its website:

“The median home value in the United States is $245,193. United States home values have gone up 3.8% over the past year and Zillow predicts they will rise 4.1% within the next year.”

Of course, these predictions are based on current trends and conditions. And those conditions are changing as we speak. It’s certainly a fluid situation. But as of right now, the economists and analysts at Zillow clearly do not see a U.S. real estate market crash occurring in 2020.

Things Have Changed Since the Last Crash

The truth is it would take a lot more than a short-term economic slowdown to cause a nationwide real estate market crash in the U.S. It would take massive job losses and income reduction, on a national scale. And that’s just not happening right now.

The U.S. housing market is not nearly as “fragile” as it was during the last crash. In the early 2000s, reckless lending practices created a ticking time bomb of unaffordable mortgage loans. People who had no business taking on a mortgage loan were qualifying with ease, thanks in part to “creative financing” products like the payment-option ARM loan.

Say what you will about government regulation and oversight, but it has certainly created a more stable mortgage industry — and thus a sturdier housing market. Mortgage default and foreclosure rates today are significantly lower than they were ten or twelve years ago.

Mortgage borrowers today are also better qualified (on average) than they were during the last housing boom-and-bust cycle. There’s more income verification during the loan process today than in the past.

Containment and ‘Lockdown’ Measures Could Reduce Home Sales, Prices

As of right now, the U.S. has not implemented the kinds of strict containment measures we are seeing in some European and Asian countries. 

Many events have been cancelled, from Broadway shows to the Boston Marathon. Large gatherings are prohibited. And an international travel ban has been put into place. But so far, the free movement of individual citizens within the U.S. remains unaffected for the most part.

If that changes — if government officials implement a kind of lockdown to restrict movement — the housing market could take a bigger hit. People would be unable to go out and look at homes. Sales would decline. This reduction in demand would slow home prices and possibly reverse them, in some areas.

At present, this is a regional fight. Some parts of the U.S. have few or no documented cases of the coronavirus right now, while other states have many. And in those affected states, the highest concentration of cases are typically centered around major population centers (but not so much the outskirts).

So if we do see a kind of lockdown implemented in the U.S., it would likely apply to select areas such as New York City — not the country as a whole.

A broader lockdown scenario would certainly slow homes sales and probably chip away at house prices in some markets. But it probably wouldn’t cause a nationwide housing market crash in 2020, unless it dragged on for many months.

Here’s something worth remembering: A virus cannot cause home prices to drop, or cause the real estate market to crash. Not directly anyway. Those things occur due to changes in supply and demand, and consumer confidence. So a lot depends on how people react to the situation.

Disclaimer: This story contains forecasts provided from third parties not associated with the Home Buying Institute. They are the equivalent of an educated guess and should be treated as such. The publisher makes no claims or assertions about future economic conditions.

Will the U.S. Real Estate Market Crash in 2020, Due to Economic Uncertainty?

Benchmark mortgage rate slides with financial markets

The benchmark 30-year fixed-rate mortgage fell this week to 3.71 percent from 3.75 percent, according to Bankrate’s weekly survey of large lenders.

Mortgage rates have declined with the 10-year Treasury note, which closely tracks mortgage rates. Stocks and government bond yields are falling in the wake of worries about the worldwide coronavirus outbreak.

A year ago, the 30-year rate was 4.54 percent. Four weeks ago, the rate was 3.70 percent. The 30-year fixed-rate average for this week is 0.91 percentage points below the 52-week high of 4.62 percent, and is 0.01 percentage points greater than the 52-week low of 3.70 percent.

The 30-year fixed mortgages in this week’s survey had an average total of 0.30 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.99 percent. This week’s rate is 0.28 percentage points lower than the 52-week average.

The 15-year fixed-rate mortgage fell to 3.00 percent from 3.08 percent.
The 5/1 adjustable-rate mortgage fell to 3.30 percent from 3.42 percent.
The 30-year fixed-rate jumbo mortgage fell to 3.69 percent from 3.70 percent.
At the current 30-year fixed rate, you’ll pay $460.85 each month for every $100,000 you borrow, down from $463.12 last week.

At the current 15-year fixed rate, you’ll pay $690.58 each month for every $100,000 you borrow, down from $694.44 last week.

At the current 5/1 ARM rate, you’ll pay $437.96 each month for every $100,000 you borrow, down from $444.59 last week.

Where rates are headed

In the week ahead (Feb. 27-March 4)), 10 percent of the experts polled by Bankrate predict rates will rise, 60 percent say rates will fall, and 30 percent predict rates will remain relatively unchanged (plus or minus 2 basis points).

“The entire conversation is now about coronavirus and what the headlines are going to be. Right now we are basically at a triple cycle low in the 10-year yield which, on Tuesday, hit an all-time low intraday,” said Logan Mohtashami, senior loan officer, AMC Lending Group in Irvine, California. “None of the recent better economic data matters, it’s all about the coronavirus headlines as future data will come in soft for some sectors.”

There is fear in the market, says Mitch Ohlbaum, president, Macoy Capital Partners, Los Angeles. “The flood into treasuries is not anything new, it is the safest and most liquid asset in the world today and where everyone wants to park money in times of distress or the unknown. This is, of course, the simple law of supply and demand and drives rates down. The selloff in equity markets moves people to treasuries, the fear of global recession moves people to treasuries, the fear of COVID-19 moves people to Treasuries.”

For homebuyers and refinancers, decision time

Rate watchers want to know if this is the time to jump on low mortgage rates or if they should wait a little longer in hopes of getting even deeper discounts on loans.

Bankrate polls experts each week on the direction of mortgage rates.

For borrowers with adjustable-rate mortgages, there’s the question of how long to ride the wave of low rates and knowing when to lock.

There is the possibility that the spread between the Treasury yields and mortgage rates will tighten, which will help drive rates lower. However, there’s no guarantee that rates will drop, which could make waiting a risky bet.

https://www.bankrate.com/mortgages/analysis/?pid=email&utm_campaign=ed_bn_mortgage&utm_medium=email&utm_source=email