Earning income without having to do much work is everyone’s dream. And while there are not many jobs in the world that allow for passive income, rental properties often come to people’s minds when they think of making money without having to work. In fact, many people are under the impression that owning a Phoenix rental property will earn nothing but passive income. In other words, being a landlord is as easy as collecting a rent check every month.
But is it really that easy?
Though passive income is a great way to earn more money, the truth is, nothing in life is ever truly passive. However, if you do it right, owning a rental property in Phoenix can get you very close to earning a passive income. Let’s see how.
What is Passive Income?
Passive income is money you earn without having to do any work at all. Instead, the money just comes to you.
Though this sounds amazing, the truth is everything in life takes at least a little bit of work. But nearly passive income is much better than active income. Active income is money you earn while you are at work. In other words, with active income, if you don’t work you don’t make any money.
When you use rental properties to pursue passive income you don’t always have to do a lot of work. Most of the hard work is done in the beginning. Once you’ve established your property and have hired a property manager to handle the property and your tenants for you, you get to sit back and enjoy the rent that is sent to your bank account every month.
How to Earn Passive Income with Phoenix Rental Properties
If you own a Phoenix rental property, don’t expect to earn a truly passive income from the start. You have to put some work into finding a property, screening and placing tenants, and managing things like rent collection, property inspections, repairs, and more.
That said, there are some things you can do to help make the money you earn more passive.
1. Buy the Right Property
No one looking to own a rental is purposefully looking to invest in a flop property that doesn’t make money. Yet, it happens all the time. If you want to earn any kind of income – passive or not – you have to buy the right property.
If you invest in a rental property that generates a lot of money, you’ll have the chance to do two things:
- Hire a property manager to help out. With a Phoenix property manager helping you with the day-to-day operations of your rental, you won’t have to do a thing. Your property manager will take care of both your tenants and your property. In the meantime, you’ll get to enjoy all the money and free time you’ve earned.
- Pay for all property-related things. Owning a rental property can be expensive. Things like the mortgage, insurance, HOA fees, and maintenance and repairs, are your responsibility. With the right property, you can earn enough money to cover all the expenses plus some.
When you buy the right rental property, you earn enough monthly cash flow to make a profit. If you don’t, you’ll find yourself putting in a lot of extra effort, making your income more active than passive.
2. Look out for Bad Locations
In addition to buying the right property, you have to pay attention to the location of your rental if you want to decrease your workload and earn a passive income.
There’s nothing worse than buying the best rental in the worst neighborhood. If you invest in a low-end housing area, you’re likely to attract low-quality tenants. This means you’ll likely have to deal with property damage, abandoned properties, late or non-payment of rent, and even a low cash flow.
After all, just because you have a valuable rental property, doesn't mean you'll be able to garner the rent rate you want. In other words, you’ll have to put in a lot of work to earn a little money and you won’t be able to claim your rental property is creating passive income for you.
3. Invest in a Real Estate Investment Trust (REIT)
Is the thought of investing in your own rental property scary? If so, there is another option. A real estate investment trust (REIT) generates money for you without you having to buy the property, maintain it, or manage it. In other words, you invest in the REIT and take in the passive income.
Investing in a REIT is perfect for those that don’t want to deal with the hassle of actually owning and managing a rental property. It also works for those that don’t want to hire a property manager either.
This type of investment is more like a stock investment. But the good thing is, it offers you another passive income opportunity.
4. Real Estate Notes
Another option for earning passive income with a rental property is a real estate note. A real estate note is a loan you hold against a rental property so that when the owner pays the mortgage, you get a cut of the pay as well. In other words, you become the bank.
With a real estate note, you don’t own the rental property. Instead, you just profit from the money others are paying for it.
5. Purchase a Turn-Key Property
Many landlords opt to purchase turn-key properties as a way to earn passive income. Turn-key properties are owned by a company that specializes in these special types of rentals. They are then assigned to property management companies for handling.
All you have to do is buy the property.
When you buy a turn-key property, there are usually tenants already living in it. You also begin accepting rent payments immediately after purchasing it. None of the day-to-day operations are your responsibility. This means you don’t have to lift a finger to earn the money being paid to you each month. It doesn’t get much more passive than this.
6. Secure Long-Term Leases
Vacancies can wreak havoc on a landlord’s bottom line. Plus, they eat up a lot of time and require a lot of work. After all, every time your Phoenix rental is vacant you have to market it as available, screen for new tenants, clean it, and much more. This is hardly passive income. In fact, you’re not earning money at all when your property is vacant.
If you can find a high-quality tenant that wants to sign a lease renewal, you’ll cut your workload down significantly. Of course, this is if you self-manage the rental and are handling everything like property advertisements and showings, tenant screenings and placements, and lease drafting. You could always opt to hire a local Phoenix property management company to do these things for you. Then your pursuit for passive income will become more of a reality than ever before.
Final Thoughts
Are you in need of a reliable Phoenix property management company to help you earn a passive income with your rental property? Then contact us today and see how we can make owning a rental property a more hands-off process.
At Real Property Management Phoenix Valley, we know that your time is important. That’s why we strive to maximize your income while handling everything from tenant screenings to rent collection, and property inspections to maintenance and repairs, so you don’t have to. And the best part is, we do this at affordable prices that don't eat into your passive income. Owning a rental property doesn’t have to be a lot of work when you trust us to take care of your tenants, property, and bottom line.
