Keys to Achieve Passive Income Through Real Estate Investing
Earning a passive income through commercial real estate isn’t just about flipping houses. Ryan Enk is a real estate investor and author who is passionate about helping people develop a customized strategy that allows them to create a passive income in unique ways. His sports arenas and RV rental fleet have helped him achieve financial freedom. But he started out as a dad of five boys with a dream to be more available to his family. His real estate investing tips can help others who might think that they don’t have the money or resources for this type of enterprise.
What Would You Do if Money Didn’t Matter?
Many successful real estate investors started their journey with a significant amount of income. Enk did not. He was selling copiers, feeling overworked and underappreciated. He wanted more time to be with his family, and he wanted to give back to the community.
So he asked himself, “What would I do if money didn’t matter?” After some introspection, he realized that he wanted to help people. If money wasn’t a factor, he would open up a sports arena, play music, or mentor others. When his wife agreed, Enk realized that he needed to pursue his passions.
Even though his bank account was sparsely filled, Enk didn’t let his lack of financial resources stop him. He knew that someone would have the money to support his big dreams, and he began his search.
The Importance of Mentorship
Enk’s first deal involved building a sports arena. Because this was something that he had never done before, he knew that it would be a hard sell to investors. That’s why his first step was to hire a consultant.
A consultant serves as part of your team. It also gives you a chance to prove that you’re working with someone who has experience. When you hire the right mentor, you don’t have to worry so much about selling yourself. You’re selling your team.
Hiring a consultant isn’t always cheap, though. Enk took out a second mortgage to pay his mentor. He also offered the consultant equity in the project. This allowed him to present his mentor as his business associate, which gave him clout when pitching to investors.
Hiring someone with experience in the business will help you create a solid business plan. However, even the perfect business plan may not convince investors if you don’t have the experience to run that type of business. Therefore, you should either have someone on your team with the know-how that your investors are looking for or build up your resume.
In Enk’s case, he developed a strategy for bringing daytime business to the sports arena. He launched a soccer program for youths while he was seeking investors. Initially, he rented space from gyms and churches to support the program. Eventually, he would run it in the arena. This plan not only served to demonstrate that the arena could bring in business during the day, but it also showed that he was able to launch and run a profitable business.
Own the Real Estate, Not Just the Business
The key to Enk’s success was that he realized the benefits of owning the real estate for the sports arena. At first, he sought investors for the business. But he didn’t own the property.
When Enk made a deal to purchase the arena from the landlord, he saw how high his returns could be. The landlord earned $300,000 by selling the property. Once Enk owned it, he was bringing in returns of 20 to 30 percent.
Rolling Real Estate
Eventually, Enk owned several single-family and multifamily properties, earning a passive income on those. But his wife wanted to purchase an RV, which would be a liability. Enk decided that he could transform it into an asset with plenty of cash flow by renting it to others.
When that pulled in $32,000 in profits in the first year, Enk realized that he could help others capitalize on this type of passive investing. He created a company that managed RV rentals, earning income from other people’s RVs without having to invest in purchasing more vehicles.
Keys to Passive Investing With Real Estate
Enk has learned a great deal from his endeavors. He shares his wealth of knowledge because he believes that commercial real estate investing is a lucrative way to earn a passive income. These keys have become part of his overall strategy.
Invest in Today Instead of Speculating About Tomorrow
Speculating happens when you purchase a property that will eventually bring in an income. This happens when you flip a house, improving it to raise its value before you sell.
But investing involves putting your money into something that is already working. When you start out, look for properties that are already doing well, such as a multifamily apartment home with regular tenants. That way, you can begin earning immediately, and you’ll be up against less risk than a speculative deal.
Project Your Losses
Most businesses struggle in the first few years. It can take three to five years to begin pulling in profits. Many startups fail because they neglect to factor in these losses. Moreover, investors could become antsy if they expected to rake in the money but aren’t seeing it come through.
Planning for these losses is important. You may need more capital than you expect to cover the overhead and your income for the first few years. With the right balance of capital, you can keep moving forward. Plus, your investors won’t be disappointed when they know that your plan accounts for these losses and a strategy for overcoming them.
Take Advantage of Trends
The RV rental business worked well because it capitalized on a popular trend. Private property rentals through sites like Airbnb were giving owners a chance to capitalize on their unused space. The same could be done for RVs.
Not every investment is going to be a long-term one. However, if you can take advantage of the current market, manage the business well, and sell when the time is right, you can earn a decent profit while you sleep.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.