Oct 4, 2023
While this article is sponsored, we apply strict editorial guidelines to all of our content.
The notion of generating passive income through real estate is extremely enticing: wealth, without all the work.
It seems straightforward: You borrow money, buy a property and rent it out. The tenant helps you pay off the mortgage, while you bring in a little extra cash. As you build equity, you can start the cycle again, scaling your real estate portfolio as you go. All the while, you can benefit from the tax incentives of real estate investing.
Advertisement
While it’s a popular plan — and owning real estate does have potential to provide a high rate of return — many first-time real estate investors don’t yet realize this kind of passive income isn’t truly “passive.”
You need to find reliable tenants who pay their rent on time. There’s insurance, property tax and asset management to consider. And you’re responsible for any repairs or maintenance required on the building; if a stove goes kaput, you’re out of pocket.
Not everyone can afford to turn their passive income plan into a part-time job — so how do savvy investors make it work?
Skip the learning curve
Accredited investors are able to tag in support through services like Plotify, a global, end-to-end property investment and asset management platform. The benefits start from the very beginning of the process: finding the right properties to invest in.
To secure the biggest return, it makes sense to purchase real estate in an up-and-coming market with potential for high appreciation. Others might be more focused on rental income. Plotify curates assets to help you achieve your investment goals.
However, if you’re not familiar with the market fundamentals, drivers and trends in a range of potential areas, it could take a significant amount of time to track down the right investment for your budget and risk tolerance.
Many investors end up investing close to home because they’re most familiar, but this limits geographic diversification and can limit upside while increasing concentration risk. To navigate this, Plotify provides insights that help you decode current macroeconomic conditions and market level commentary that helps you select the best assets and locations for your risk appetite.
Advertisement
Plotify focuses on single-family rental properties (SFR) in up-and-coming second- and third-tier markets with positive net migration trends. It chooses properties based on its forecast of yields, long-term rental potential and stability of demand in areas with strong growth, a skilled, growing workforce and proximity to hubs of innovation.
While potential investors should consider their own individual needs and preferences, the company selects and inspects every site to ensure it’s a viable and attractive option. Currently, Plotify is acquiring properties in the U.S. and U.K.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Cut down time, expense and effort
Investing in just one single-family rental property can take months of tedium, not to mention the high transaction costs. According to Plotify, it takes 46 days on average to close a purchase loan on a single-family rental, with an average of around $10,000 to $20,000 in total closing costs.
Meanwhile, Plotify minimizes costs and maximizes convenience by bundling the odds and ends of a given investment into a simple “Plot.”
A Plot is a single residential property, owned by an individual single-purpose legal entity, with all of the related services built right in — including financing, insurance, property management and tenancy arrangements. A single investor wholly owns a single Plot, with an optional, no-application and non-recourse loan. As a direct owner of the Plot, you can benefit from Plotify’s institutional-grade tax optimization when you choose to exit.
Not only does this approach take many of the convoluted considerations that go into buying a property and trim them down into a simple package, you can also sell that package at your leisure. Plots can be bought and sold online at any time, from anywhere in the world, via the Plotify Marketplace.
Get on top of hidden costs and hassles
As previously mentioned, anyone leasing real estate will still have to deal with ongoing costs such as insurance, property taxes and maintenance — as well as expensive surprises in the form of repairs or unpaid rent.
Even when you’re lucky and everything is going right, finding tenants, collecting checks and arranging repairs and maintenance can be time-consuming and take your time away from other opportunities.
Advertisement
In the Plotify model, insurance expenses are included with the Plot and paid on a monthly basis, and all property tax and management accounting services are taken care of. Plotify has also partnered with recognized local and national property managers to handle the day-to-day management of each property and its tenants. Because of its scale, Plotify says, it can negotiate discounts with leading service providers and pass the benefits through to the investor.
Crucially, each Plot comes with a reserve fund, which provides for unexpected expenses to smooth your returns and avoid having to pay in additional capital every time something needs to be done to the property.
In addition, many investors struggle to keep track of bills and expenses and can be easily confused when it comes time to file taxes related to the property. Plotify provides full transparency into each line item of income and expenses with detailed monthly and quarterly reporting.
Plotify uses Deloitte for the accounting of each Plot and provides investors with a year-end tax packet to make filing easy for investors.
All of these services are built into the cost structure of the platform, allowing you to invest directly in individual properties via an LLC without having to manage those properties directly. With full control, all you need to do is decide which of the carefully curated opportunities are right for you and how long you want to hold them.
So while passive income is never truly “passive” when it comes to real estate, platforms like Plotify take so much of the hassle out of the equation you can get tantalizingly close.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Vawn Himmelsbach is a veteran journalist who has been covering tech, business, finance and travel for the past three decades. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, Metro News, Canadian Geographic, Zoomer, CAA Magazine, Travelweek, Explore Magazine, Flare and Consumer Reports, to name a few.
Managing Money • 23h ago
