One of the widely selected businesses in the passive income group is real estate. Why real estate? Because people perceive this business as almost sure profit business. Majority of families dream of owning a house. This makes the real estate market a huge market. It is also a general perception that a house is an asset. It is usually the biggest single investment for an average income family.
The perception that it is a sure profit business is not always true in reality although the chances of making a profit against losing money is higher. There are times real estate properties are sold at a loss; not to mention those properties that have been mortgaged to banks or financing companies when the appraised or loaned money in exchange for the house is always lower than prevailing or actual price, should the house be foreclosed for non-payment of loans.
The perception that a house is always an asset is also not correct; it can (in many instances) be a liability. If you own a house or intend to have one, consider the following factors to determine if it is an asset or a liability:
- Property tax (which is an expense).
- Mortgage payment to the bank or loan company (consider the interest charge which is also an expense.
- If you are having the house rented to a tenant, is the rental enough to cover above-mentioned expenses?
- Other incidental expenses (including maintenance).
- Offset the expenses against the income you will generate from the house and you will know if it is an asset or liability. If you are using the house for yourself, compare these expenses to the rent you would pay your landlord. Assuming you are confident that the house won’t be foreclosed in the event of non-payment of loans, you have to consider the value of the house against the total money you will invest on it once it has been fully paid for. That way, you will know if the house you bought is too expensive or not, and if you are going to make money out of it once you sell it.
The mortgage payment you make to the bank may leave you without any savings, and you will miss out on other opportunities to make money because of your obligation on the house.
What you just read are eye openers or wake up calls just in case they haven’t occurred to you. They are not meant to be recommendations. It is a case-to-case basis depending on the situation. Still, the decision is yours.
When it comes to the value of the real estate property you own or want to buy, some of the determinants that can make it more valuable or less valuable are:
- Accessibility to transportation, schools, stores, church, and service-oriented establishments.
- Security of surroundings.
- Environmental condition like elevation (susceptibility to flooding), road condition.
- Sanitation or cleanliness of surroundings.
- Weather condition; in temperate climates, a corner lot is more expensive but a corner lot in snowy areas is cheaper due to more work involved in shoveling snow.
If you are looking for a house to buy, you can make an offer as low as half the asking price if you feel it is too high. Do not think that a much lower offer would offend the seller. It is part of business. If consumer items on sale can go as low as half the regular price, a house can also be priced in the same manner.
If you offer to buy a house and the seller accepts but you are still having second thoughts if you want to buy or not, you can come up with conditions like: “subject to approval of partner,” wherein your partner could be your wife or business associate or a friend.
Should you be in the business of buying or selling real estate, a good practice would be to find buyers first before closing a deal with sellers even if you have found the seller first. With this kind of set up, your profit is realized the moment you buy the house, not after you sell it.
In the business of owning real estate properties intended for rental to tenants, hire a property manager or supervisor. A good manager when you pay him/her well is an asset for your business. He/she will reciprocate what you pay with dedicated service and valuable information which you can use for your other real estate businesses. It also allows you more time and attention to other moneymaking ventures which makes your work a lot easier.
Information about bargains on real estate can be available in law offices and in foreclosed departments of banks and loan companies. Court houses handling civil suits regarding land disputes are also sources of information. It is most likely that properties for sale are handled through bidding.
You can also buy a big piece of land and sub-divide it into small ones before putting it up for sale, similar to sub-division developers but in a small way. This is one way to increase the value of the house you sell, thereby increasing your profit margin. Or you can do it the other way around – by buying small lands linked to each other; consolidate it into one big piece, and sell it to a ready buyer.
Another possible source of real estate business is memorial lots. Some rich people invest their money into buying many pieces of these lots and wait for prospective buyers. Your marketing arm can be the sales people of the very company where you bought the lots from. They just draw commissions from you every time a transaction they recommend materializes.
The options on real estate are various and numerous. Your creative juices can be put to good use in this line of business.
Investing can be a very profitable venture if you have the right knowledge about it. Investors can be categorized into two:
- The ones who invest their money on ready-made stocks like a packaged deal. They can be likened to RTW (ready-to-wear) clothing. They are similar to buying a computer that comes with the seller’s recommendation of monitor, CPU, printer, keyboard, etc. combined to make a package. Or it is like a set menu in a restaurant. The investor doesn’t have to worry or think much, leaving the choices in the hands of the broker.
- The ones who make, create, assemble, or customize their own investments. They are known as professional investors because they come up with their own creative combination of investment packages. They can be likened to tailor-made clothing.
Being in this category requires extraordinary skills such as the following:
You must be able to see with your mind what is usually missed by others. The mind works creatively. It is like predicting something that is likely to happen.
You must be able to position yourself as the important go-between or middleman. It’s like arranging a deal between a buyer and a seller in real estate.
You must be able to organize professional or smart people – people who are even more intelligent than you are in their own field of expertise. You hire their services and utilize their talent to suit your creative ideas.
In a way, wealth does not always come in the form of money. Wealth is also knowing how to invest. Knowing how to invest is active thinking. The more ways you expose or exercise your mind on investing, the stronger and more creative it becomes.
Other Recommendable Moneymaking Ventures
One of the best-liked source of passive income is the network marketing business, also popularly known as multi-level marketing. You need not come up with a huge capital unlike the common or conventional way of doing business. It does not require any employee. You do all the work yourself. But it requires hard work and patience. You must be committed and it takes time to realize a six-figure per annum income.
Portfolio Income is derived from paper assets; i.e. stock market, bonds, mutual funds, notes (IOUs) and the like. Most professional investors invest in this kind of income. This kind of investing requires financial skills. The wider the scope of financial skills you have, the better your chances of creating wealth.
Some people prefer to specialize on a certain field. The world of specialists is a world of learning more about less. As their knowledge increases on a certain field, their area of coverage decreases. From where they are employed now, it will be difficult to look for another job of the same line and income. That is why, it is advisable that they become union members of their field of specialization for their own protection.
As much as possible, you must venture into a business that doesn’t require your presence much, giving you more time to look for other opportunities. Small businesses like coin-operated machines (gumballs, joy rides, snack foods and drinks) situated in shopping centers are favorites. The individual sales come in small amounts but the volume comes big when totaled and the profit margin is very attractive.
If you are acquiring a franchise, determine your return of investment and be meticulous on the terms stipulated on the contract.
People with special skills on music and writing collect royalties from their intellectual properties. Collector’s items (stamps, rare coins, antiques, paintings, precious stones and metals, cards) usually appreciate in value. There are countless other businesses you can consider going into. Only one thing to keep in mind. Know the business first before you go into it and keep your mind as creative as it can be.