12 Ways to Generate Passive Income in Commercial Real Estate

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Real estate in the current time undoubtedly offers a great wealth-generating opportunity. Not only are they tangible assets, but also you can utilize them as leverage for purchase beyond the amount you can afford a loan. Investment in real estate properties is receiving great response given the benefits.

The amount of capital a buyer can raise determines if they can purchase or develop a project. This is where the investors can help. The investments of the people are entirely passive besides their contributed cash.

This means the investors do not get involved in any management or disposal of assets. So, without any hard work, you can get great benefits from real estate investments.

So if you have decided to become a real estate investor, then here are the top ways to make your dream possible.

1. Construction and development

Every year there is a significant increase in the number of new projects built and developed. With all the advancements and growth in a country, real estate grows continuously. Thus, there is a tremendous need for new construction projects.

You can consider investing in a group of developers and contractors who are building single-family residential homes to commercial office spaces.

2. Crowdfunding

In today’s time, online fundraisers have received great popularity. Numerous platforms allow commercial real estate investment. Just like the REIT investments, the investors have the opportunity to invest as little as $500 and pool their cash with other investors to contribute to a big project. As a result, the investors benefit from the cash flow and the long-term appreciation of the property.

3. Exchange-traded funds

An exchange-traded fund is a group of bonds or stocks placed into a single fund. Although the ETFs come with lower costs like mutual funds, they can be invested in stocks published by the real estate investment trust that owns hospitality, office retail, etc. Thus, such diversification helps reduce the risk of investing in real estate.

4. Hard money lending

If you have good cash but don’t want to invest in your deals, you can become a hard money lender. Numerous real estate investors take help from hard money when they cannot gain a bank loan or when they want money in a short time. Further, hard money is also an option for investors looking for rehab and flipping the house quickly.

The hard money lenders charge the borrower an upfront fee along with 10-12%+ annual interest on the loan. This isn’t a bad deal, but you must be careful with the lending scenario to know you are not only and lending money to a good borrower but also for a successful project.

5. Hire a property manager

If you want to invest in commercial real estate in your area but you do not want any partners, you can consider hiring a property manager. In this scenario, you will be an active investor who will have a full-service property management company that will help make a project a passive real estate investment.

The commercial property managers charge approx 4% to 10% of the rents depending upon the nature and size of the project. They will perform all the minor repairs, vetting prospective tenants, touring, collecting rents, and more. Just remember the commercial investment you are making must be capable enough to pay a property management company.

6. Mutual funds

Just like the ETFs investments, you have the option to invest in real estate mutual funds passively. They are a low-cost alternative to all the passive real estate investment options available in the market.

One can easily find a mutual funds track record that will offer confidence and courage about future returns. Additionally, mutual funds are generally run by seasoned veterans and economists in the commercial real estate sector. Thus, you will earn well from it.

7. Owner financing

If you don’t want to run a project of your own, you can become a lender for someone else’s project. Just like hard money lending, you will help a borrower get an adequate loan for his real estate investment. It is an excellent choice for those who already own a real estate as it will help maintain that passive income and avoid paying any hefty taxes.

8. Real estate company

If you want to keep your investment local, you can directly invest in a commercial real estate company located in your area. With this, you will have the assurance of seeing the property anytime you want.

Several commercial real estate companies deal in office parks, hospitality, shopping centers, and commercial real estate developers. You can choose any of the projects you like to invest in, but it will be better to conduct due diligence before buying shares in a local company. This will guarantee safety for the future.

9. Real estate investment trust

For investing in REIT, you need not own anything. The trust will help you diversify your portfolio as it will help you invest in multiple asset classes. Like the bonds and stocks, it comes with long-term data, which will help reduce any uncertainty about the ups and downs of the real estate market.

It will be beneficial if you stay away from the non-trade REITs and purchase only publicly-traded REITs. This will help stay safe from lack of transparency, hire fees, and unnecessary risk.

10. Real estate notes

Real estate notes are similar to the owner financing as a mortgage loan secures the promissory note. The loan is generally passed on a property that already exists. When taking real estate notes from a bank, you are purchasing debts that are a lot lower than what a real estate investor will pay.

If you have decided on real estate notes as your passive investment, it will be better to do thorough due diligence. This will offer you a good idea about the certainty you are getting into, whether the investment is for a real estate investor or a bank because there is a chance you might end up getting that property one day.

11. Syndication

It is simply a collection of funds from various investors to acquire numerous types of real estate property. Like any other options mentioned above, syndication can be as small as buying a small office to building a large office area.

The capital raised here can be used for renovation, acquisition, improvements, construction, and any other things a developer wants. The passive investors here are called limited partners who gain some sort of preferred return on the capital and equity in the property.

12. Transactional funding

This mode of investment is a lot similar to debt financing and hard money. However, here you are, financing the project in between closings. It is a short-term learning solution for real estate investors who plan to get in and out of the real estate dues quickly. The wholesalers take maximum benefit from transactional funding to keep their double closing separate.

Conclusion

Given all the available choices choosing the right one for your passive real estate investment can be challenging. To make things easy, you can contact Private Capital Investors. They are a reputable firm that will help you decide the correct mode of real estate investment for your case. With their professional assistance, you will guarantee a secured and safe investment, which will bring good results.

Want to learn more? Get in touch with us today.

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