Who doesn’t want to work less and make more money? We recently talked with Anton Ivanov, who spends just one hour each week managing his investment properties and makes $10,000 a month in passive income.
But Anton’s business wasn’t built overnight. Below, we’ll share his tips for passive investing in commercial properties.
Don’t Be Afraid to Start Small
Everyone gets into real estate investment wanting to make the big bucks, but it’s rarely possible to generate a huge income in the beginning unless you’re fortunate enough to have a lot of start-up capital.
Instead, think about starting small. Start with just one property and then invest in another once the first is doing well. Keep putting money back into investing and eventually you may see exponential growth.
House Hacking Can Be a Great Way to Get Started
One of the best ways to generate passive income with little money is through house hacking. House hacking involves buying a rental property and living in one of the units while renting out the others.
You’ll often be able to cover your housing costs and have more money left over to focus on growing your investments.
Start with Turnkey Properties
If you listen to any investment advice, you’ll often hear talk of value-add multifamily properties and how much money there is to be made there. However, you may want to start with turn-key properties, especially if you’re just getting started and have little to invest.
Turnkey properties allow you to start renting and generating an income quickly after purchase. Once you’ve made some money, then you can turn to value-add properties.
Move On to Value-Add Properties When You Have More Experience
Once you have experience working with multifamily properties and know an area well, it’s time to move on to value-add multifamily properties. You’ll have a good understanding of how the market works and which commercial properties will yield good results. You can significantly increase your income with these types of properties, but you’ll need some money going in.
Find the Right Properties
It kind of goes without saying that the properties you choose can make or break you. However, there are a few things you need to consider to help you find the right properties.
Obviously, you want to choose properties in an area where the rent is high enough for you to make a comfortable profit. You’ll also want to look in markets where the economy is doing well, and employment is up. These areas are likely to have lots of people looking to rent.
Try to find properties that are also in areas where the real estate is appreciating. If you decide to sell, you can get even more money, and if the property didn’t make as much as you’d hoped, at least you can make something off the sale.
Consider Looking Out of State
If your location isn’t a great place for real estate or rental properties, you may need to look out of state. Start researching to find cities that are medium-sized and going through a growth spurt. If you’re lucky, you can get in at just the right time.
You’ll want to stick to your criteria. Find a place where the rent is high or going up and where property values are on the rise.
Scope Out the Area
Once you’ve settled on an area, it’s a good idea to visit, especially when you’re not familiar with the neighborhoods. Things often look one way online and can look quite different in person.
Spend time riding around the neighborhoods and talking to locals. You’ll be able to get a sense of where the best areas are. You can also check out potential properties in person.
Network with Other Investors
One of the best moves you can make is to network with other investors, particularly those who are involved in the same type of investing as you and are located in the area where you’re looking to make a purchase.
It’s important to meet with investors in the property area because they’ll be able to give you some good advice about the areas and types of properties that do well. You may see other investors as competition, but you can be much more successful as allies.
Find Great Property Managers
To be more hands-off with your properties, it’s essential that you hire great property managers. These are the people who will be acting in your stead, so you want to make sure you get the right people.
You’ll want to start by meeting with different property managers to see who will be a good fit for what you want. It’s not enough to go on another’s word about a manager because what works for them may not work for you.
Once you’ve found a property manager, take the time to train them. Be clear about what you expect and make sure you both agree on everything before you hire them.
Hire a Great Team
Beyond property managers, you’ll also need others to help you. Meet with all contractors and anyone else who’ll work on your property. Make sure everyone is on board with your expectations. You’ll save yourself a lot of headaches if you’re clear up front.
Research and Take All the Variables into Account
You need to do your underwriting before making the final decision on a property. Do plenty of research and don’t just get your information from one source. You should check online records and reviews and talk to people with experience in the area. If you only go to one source for research, you run the risk of overestimating the potential of a property.
Don’t just look at cash flow and the real estate market when it comes to a property. There are other variables to consider, such as the cost of any renovations and maintenance. What’s the vacancy like? Make sure the profit’s worth it after all of the variables have been considered.
Build a Business That Can Run Without You
The key to passive investing is to build a business that can run without you. If you’ve trained your team well, they’ll know exactly what you’d want them to do in every situation. They’ll rarely need to contact you.
After spending some time getting everything established, you can cut down your work time to an hour or less per week. You’ll simply have to check in and manage a few things to keep it running smoothly.
Another secret to building a hands-off business is buying property out of town. You’ll be forced to train a team to put in charge of everything and you won’t be around to deal with every problem that arises. You’ll be forced to be more hands-off.
Final Thoughts
If you’re angling for a passive income, commercial investing is a great space to start. There’s always money in real estate and you can get a cash flow almost immediately if you choose the right properties. The keys are to start small, do your due diligence, and build a team you can trust.