Monday, December 16, 2013

Residual Income and Real Estate: Is There A Better Way?

Whether you realize it or not, your home and any property you own can be providing you with residual income. It may not be cold, hard cash every month but real estate can be a great way to have income coming in for years to come. It can even be passed on to your family so they can enjoy the benefits as well.

When you make a real estate purchase, you can either decide to live in it yourself or you can choose to rent it out. By having the property and making the payments on it monthly, you will be creating equity. This equity can then be used as income if the time ever comes when you need it. The investment in real estate should continue to grow. There are times when the investment may remain the same or decrease in value but if you have chosen to use it as an investment, it runs the risk of any investment.

The residual income in real estate comes when you are able to pay off the investment, in most cases, a house or rental property, and you can still collect rent from a person living in the property. This situation is ideal because you are not paying on a mortgage but the payments coming in are a profit. As long as you own the property and it is rented, there is income coming in.

This residual income will benefit you and your family. Property can be conveyed to heirs so your family can benefit from having a rental property bringing in income for their lifetime. The family can choose to have a realtor or management company handle the rental or they can do it for themselves. Either way, the money coming in from the rental will be profit after taxes and insurance are paid each year and the residual income will go directly to the family or trustee of the property.

Because real estate can fluctuate in value, the best time to purchase an investment property, meant to create income is when the price of the property is low. You should also do your best to pay off the property so that any income that comes from the tenant of the property becomes profit.

Once the property begins to make money on its own and there is a reserve available for repairs, insurance, and taxes, the property will be considered a successful investment. If you are looking for income, real estate is a great way to do it, but you have to make sure you don't end up in debt for a possible high return.

The main problem with this type of residual income is that it can be a huge headache. First of all it takes a lot of money to buy a home or even more for an apartment complex. Then you have to do maintenance to keep the place nice so people will want to live there. Right now the banks are not just lending money out to just anyone. This can make it hard for anyone wanting to get into the real estate game. The good thing is there are other ways to make a solid residual income and without all the overhead and risk.

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