What Is Passive Income in Real Estate?

If you have been looking for a way to generate a steady income that will grow, then real estate investment may be just what you need. When you become a landlord and collect rent, you can supplement your lifestyle with passive income. Such income will set you up for lifelong financial security. The profit you earn from rent payments is categorized as passive income. Passive income gets taxed less than ordinary active income, good news for anyone who wants to keep more of their wealth.

New York City’s rental market is one of the most expensive in the world, and for a good reason. The competition is steep, and the cost of living is high. With NYC offers some of the best career opportunities and salaries, tenants are prepared to pay a premium for the opportunity.

For investors, the appeal of NYC rental properties is timeless. As people relocate to New York for its lucrative opportunities, owning rental properties and collecting rent from tenants allows you to profit from a passive stream of dependable income.

It Is Not About Getting Rich Quick

Unlike house flipping, where one often sees dramatic profits in lump sums, rental investment requires endurance and patience. Your gains are likely to be small at first. As you pay off the loans and acquire more properties to lease, your income will increase. Rental investment is a long game that can even go into overtime (thanks to years of buying properties and paying down loans), but if your goal is a comfortable retirement, then you need to stay the course.

Collecting rent from multiple paid-off units creates an extremely comfortable lifestyle that gives you the freedom to fulfill more of your goals and dreams. Also, if you hire a property manager, you can be free from making maintenance calls and collecting the rent. This enables you to prepare for a stress-free and enjoyable retirement.

Passive Real Estate Income

The net profits collected are classified as passive income. Alternatively, the income you are not actively involved in generating. Passive income will be taxed at a fixed 15% rate regardless of how much you earn. Therefore, even if you make over $100,000 a year and get taxed heavily for your regular salary. All the passive income you generate from rental properties will be taxed at a lower rate. If you are a higher earner getting taxed at 35% of your ordinary income, it is taxed at just 15% for your passive income stream to keep more money in your pockets.

Passive Income is Flexible

Another passive income perk is that you can decide how much time to invest in earning it. You can choose to have just a few properties that you leave to a property manager while keeping your day job. It is also possible to become a landlord full-time and live entirely off of your net rental profits. Whether you want to invest 5 hours a week or 50 toward your rental income is entirely up to you.

Let Your Tenants Pay Off Your Loans

If you took out a loan to buy your first property, you could use the rent you collect to pay off your debt. Since rent is priced higher than a typical mortgage, the difference between what you receive in rent and the installments you pay toward your loan will be your profit. You can also use the money you receive emergency savings or for extra payments toward the loan’s principal. Having other people pay off your loans and investments is one way to work smarter, not harder. This process requires patience, but once your loans are paid off, you will see noticeable profits that continue to grow.

Rental Income Makes a Comfortable Retirement

Retirement income traditionally consists of a fixed pension and social security check every month. With the costs of living rising over time, however, you will want to maintain your lifestyle. It may not be possible to live as well ten years into your retirement if your income stays the same while the costs of utilities and food increase. It is where your rental income can help you! Rent is inclined to rise with the cost of living, meaning that you will have income that stays up to speed with inflation as a landlord. Also, you should be able to pay off a majority of the mortgages on your rental units. By retirement age, you should have several paid-off rental properties generating increased profits and helping you live well.

Rental Prices Go Up With Costs of Living and Market Demand

Even if you own properties that adhere to rent stabilization regulations, rent payments in New York have traditionally experienced an upward trend. As the cost of living inevitably rises, salaries will need to keep pace, and rent should increase accordingly. As a landlord, you will need to charge an appropriate monthly rent to cover the maintenance and fees to profit appropriately.

Let a Real Estate Agent Help You Find the Perfect Investment

If you need help finding the right investment property, get the expertise of a real estate agent who knows New York. Not only can an agent help you gain a property located in a desirable area, but it will also be likely to grow in value and can negotiate the best deal.

The Demand for Rentals is Timeless

Though being a landlord isn’t risk-free, the likelihood of your rental unit losing relevance is slim. Keep your properly maintained and marketable to future tenants. After all, humans will always need places to live. Combine this unique security with the likelihood that your investment will increase in value—a timeless and dependable asset.