Why Rental Property Investing Is a Top Passive Income Strategy – Motley Fool

Investing in real estate is one of the most powerful wealth-building tools. The great thing about it is that you do not have to be a millionaire to tap into the industry; any ordinary Joe or Jane can become a real estate investor. One of the simplest ways to get into the market is to hop into the versatile world of rental real estate.

If you are interested in becoming one of the more than 10 million Americans who own rental real estate, there are many investing options and strategies that you can explore. Let’s take a look at how you can start your journey, as well as why this strategy can be a winner.

Rent out part of your home

When it comes to real estate, way more than charity begins at home. Your next stream of income can start there too. You can use your residential property, i.e., your home, to increase your cash flow without much effort by renting out a room or your basement or turning your garage into an investment gold mine.

According to Census data cited by Pew Research, 36% of the nation’s 122.8 million households were renters in 2019, so turning your home into an investment property will give you a large stream of consumers to tap into and you won’t have to go further than your front door to start generating an income from rental real estate. You will also do not have to quit your day job! This is why rental real estate is so great — any homeowner can turn their home into a wealth-building machine.

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Purchase a rental property

If living with your tenants is not your cup of tea, purchasing an investment property may be the next best thing. Whether it is a commercial property, an apartment building, or a house, purchasing an investment property is a great strategy to use. Much like when renting out a portion of your home, when it comes to purchasing an investment property, you can start as small or large as you like. In fact, 72.5% of single-unit rental properties are owned by individuals, according to that same Pew Research report.

As a property owner, you can even decide whether to accept tenants who receive HUD’s housing choice voucher, thereby guaranteeing a portion of your income every month, or accept tenants who will pay via cash or check.

Whatever you decide, when it comes to investment property ownership, you do not have to go big or go home — you simply need to acquire a property that matches your budget and risk tolerance.