Take a look at these six basic concepts when generating passive income

Investing in real estate is a smart way to generate passive income but it requires knowledge, guidance, and research. Here is a list of basic concepts you need to know to get started.

1Cash Flow

Cash flow is essentially your net income after tax, mortgage payment, insurance, and maintenance costs minus vacancy rates. The most valuable properties give you a regular monthly cash flow. They allow you to generate consistent rental passive income and, more significantly, allow real estate investments to become a profit.

2Leverage

Take the money you’ve earned, or borrowed, to buy a property. The beauty of investing in real estate is that you can leverage borrowed funds to build up your portfolio. The point is to increase your returns on other people’s money. You can either use all of the cash to splurge on one property or use it to invest in multiple properties.

3Appreciation

Real estate will continuously increase in value over time. The value of homes appreciates year over year. You increase the value of the property by spending money on renovations and upgrading the home. In turn, as an investor, this will allow you to profit more as the rent price increases.

4Investment in Apartments

I recommend investing in apartments – around 32 units – because you can hold 3 to 5 properties with your current income. By investing in multiple units, you can diversify the amount of rent you receive and spread out your risk over different areas.

5Location

When investing in real estate, pay attention to your property’s location. Look at well-known areas or those with higher migrating populations.

6Real Estate Investment Return

Investing in real estate gives you a high-paying return. By multiplying your investment properties, you give yourself more to profit from and you could have a lifelong source of income.

Remember, this takes time and experience, so always keep learning from those who have been there before (like myself). 

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