To Top

Tag Archive: Passive Income

  1. Beginner’s Guide to Passive Income through CRE

    Comments Off on Beginner’s Guide to Passive Income through CRE

    “If you don’t find a way to make money while you sleep, you will work until you die.” -Warren Buffett

    Does the billionaire Berkshire Hathaway CEO have a point? Most things in life require time or money. But what if you could trade money for time?

    Financial freedom can “buy” more time to do the things you love and pursue the things you’re passionate about. One way to achieve financial freedom is through developing passive income streams.

    According to The College Investor, “Over the last two centuries, about 90 percent of the world’s millionaires have been created by investing in real estate.” This is a staggering statistic: 9 out of every 10 millionaires created their wealth through real estate investing. Moreover, a report from the IRS finds the average millionaire has not one, not two, but SEVEN sources of income. (Vandenboss, 2024).

    Real estate investing is not a “get rich quick” scheme. Real estate investing utilizes leverage, compounded over time, to an investors’ advantage resulting in long-term wealth. If purchased and managed correctly, an income producing asset should be working for you every second of every day.

    With the above in mind, it is imperative to fully understand there is risk associated with real estate investing. Commercial real estate investing is a complex process with many potential pitfalls. We recommend consulting with trusted advisors before solidifying your next investment. The information below provides some general guidelines to consider as you expand your portfolio or kick things off in a successful real estate investment venture:

    Passive may not be so passive. Creating passive income streams via commercial real estate can still be work, even if you hire a property manager. There are many angles to consider before deciding to build passive income through commercial real estate investments – and it’s not for everyone.

    Know the market. The IRS defines passive income as regular earnings from real estate activities – unless you’re a real estate professional.

    Macro-economic factors, such as interest rates, environmental policy and federal investment programs (1031, Opportunity Zones), and micro-economic factors, such as local employment trends, infrastructure and school districts, can positively or negatively impact your real estate investment. So, since you’re likely not a commercial real estate professional, consult with the experts at Black Diamond Realty.

    Rental income and appreciation over time. These are the two primary ways to generate passive income in commercial real estate. Rental income is obtained by leasing commercial property space to tenants or businesses. Passive income revenue through a property’s appreciation over time refers to investing in a property and selling it at a future date when the property has increased in value as a result of market factors, property improvements, or the economy.

    Where to start? Triple Net Leases (NNN). We have previously discussed Triple New Leases, and they can offer a perfect passive income investment strategy. Investors take a hands-off approach to building operations and maintenance while gaining a reliable cash flow source from lessees (Crowd, 2023). Two other profitable sectors for passive income in commercial real estate are multifamily and industrial properties. Multifamily properties provide steady income through leases and, as we have previously noted, industrial real estate is riding a wave of popularity due to the rising demand for ecommerce distribution centers (First National Realty Partners, 2024).

    View a selection of Black Diamond Realty: 

     

    Article by Black Diamond Realty

    References
    Crowd. (2023, August 3). Triple Net: the ultimate passive real estate investment – Crowdvest LLC. Crowdvest LLC. https://crowdvestllc.com/resources/triple-net/
    First National Realty Partners. (2024, July 19). The Beginner’s guide to Commercial real estate investing. First National Realty Partners. https://fnrpusa.com/blog/commercial-real-estate-investing/Vandenboss, K. (2024, May 30). The average millionaire has 7 sources of income – here are 3 you can start building today. Yahoo Finance. Retrieved September 6, 2024, from https://finance.yahoo.com/news/average-millionaire-7-sources-income-164311915.html#

    __

    This article, financial analysis, and any predictions herein are based on information supplied by sources believed to be reputable. It contains selected information to formulate reasonable judgments but does not contain all the information necessary for each person’s individual circumstances.  Information and economic conditions change and are unique to each individual.  Each person must complete its own due diligence to ensure accuracy and applicability.  Information has been summarized herein to facilitate review; these summaries are not intended to be a comprehensive or individualized analysis.  THIS ARTICLE’S FORWARD-LOOKING STATEMENTS AND REAL ESTATE INVESTMENT INVOLVE RISK AND UNCERTAINTY.  PAST INFORMATION IS NOT INDICATIVE OF FUTURE RESULTS.  ACTUAL RESULTS CAN VARY MATERIALLY, AS A RESULT OF MULTIPLE FACTORS.  BLACK DIAMOND REALTY EXPRESSLY EXCLUDES AND DISCLAIMS ANY REPRESENTATION, WARRANTY (INCLUDING ANY WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR ARISING FROM CAUSE OF DEALING OR USAGE OF TRADE), CONDITION, OR UNDERTAKING THAT WOULD BE IMPLIED BY THIS ARTICLE TO THE FULLEST EXTENT PERMITTED BY LAW.

  2. Investing Your Way to Financial Freedom

    Comments Off on Investing Your Way to Financial Freedom

    Quarter 4 marks a fun and exciting time for many. We are experiencing changing seasons, ratcheting up anticipation for forthcoming holidays and enjoying the excitement of football season. It is a time to be thankful, push hard to the finish and plan for the future.

    In the coming months, many will begin setting new yearly goals which may include traveling with family and friends, pursuing new business ventures, giving to charity or sculpting your body. Many things in life, goals included, require time and/or money. In our professional careers, each of us is consistently trading time for money. What if the opposite could be true?

    Money is an empowering tool that, if utilized properly, can enact positive change and help facilitate positive outcomes. Money is necessary to live your life and allow you to enjoy adventures, conquer goals and achieve dreams. Is there a way to trade money for time? How do you get out of the rat race while making enough money to live your life on your terms? There is no easy answer but diversifying your investments to include real estate could offer passive income. Passive income can help you achieve financial freedom (more money coming in each month than your expenses) and “buy” more time.

    According to The College Investor, “Over the last two centuries, about 90 percent of the world’s millionaires have been created by investing in real estate.” This is a staggering statistic:  9 out of every 10 millionaires created their wealth through real estate investing.  Real estate investing is not a “get rich quick” scheme. Real estate investing utilizes leverage, compounded over time, to an investors’ advantage resulting in long-term wealth. If purchased and managed correctly, an income producing asset should be working for you every second of every day.

    With the above in mind, it is imperative to fully understand there is risk associated with real estate investing. Commercial real estate investing is a complex process with many potential pitfalls. We recommend consulting with trusted advisors before solidifying your next investment. Black Diamond Realty’s tips are meant to guide your real estate investments toward positive cash flow, wealth creation and passive income. The tips below provide some general guidelines to consider as you expand your portfolio or kick things off in a successful real estate investment venture.

    1. Know the market. Macro-economic factors, such as interest rates, environmental policy and federal investment programs (1031, Opportunity Zones), and micro-economic factors, such as local employment trends, infrastructure and school districts, can positively or negatively impact your real estate investment. Unless you are actively involved in a real estate market, it is impossible for you to fully understand the intangibles and intricacies of any given market.
    2. Create a rainy-day fund. It is preferable to have it in place from the start but, at a minimum, build up via cash flow before taking a dime of distribution. A minimum of six months is recommended with a preferred 12 months of cash reserves in place. Cash reserves should cover “what if” scenarios and anticipated future capital improvements. Everyone loves to dream about and plan for the “rosy days.” That’s easy. Within your proforma and underwriting, it is also important to look at challenging circumstances that could negatively affect your investment position and overall return. Plan for the negative “what ifs” even if the chance of happening is relatively small. The good news: If you pursue bank financing, the credit department at ABC Bank will, at least in part, serve as a backstop to filter out some of the negative what ifs.
    3. Plan for capital improvements. They will happen: A hot water tank goes down. A roof goes bad. Flooring needs replaced. The parking lot needs paved. These examples only touch the surface. Capital improvements are not a matter of if, but when; so, plan on them. On your proforma, plan for 2-5% (of gross income) in capital improvement money. Very few individuals want to endear the title of “slumlord.” “Milking” a property is risky business and reflects negatively on the community you are serving.
    4. Maximize your strengths. Develop a strong team. All of us are gifted in certain areas and bring value to any given deal. For some, they are gifted communicators and can help a tenant feel comfortable moving forward. Others are gifted in real estate law, accounting, marketing, or construction. Many specializations are required to help ensure a successful real estate venture. You cannot climb to the top of the real estate mountain by yourself. Finding strategic, trusted relationships and vendors is critical. Build relationships. Focus on building people up within your team.
    5. Do not marry your property. You are only married to your husband/wife and your family. Do not hold your real estate investments on the same pedestal. Real estate investments are meant to make money while providing a service to the tenants it serves. Treat it that way. Run it like a business while maintaining a high level of integrity, honesty and diligence.

    Following the guidelines outlined in this article should help avoid investment pitfalls during ownership. Knowing when to buy, hold and divest is another critical element of real estate investing. We highly recommend consulting with a real estate professional, with strong expertise in the investment field of your choosing, before pulling the trigger. At Black Diamond Realty, we have sold tens of millions of dollars in real estate investments. Our firm is building a market niche in this space. Our Black Diamond Realty team invites the opportunity to meet with you and your partners to discuss your goals with the purpose of helping you achieve financial freedom.

    To view all of our available investment opportunities, Click Here.

     

    Article by David Lorenze. 

     

Navigate:
Morgantown Office

1399 Stewartstown Road
Morgantown, WV 26505

P: 304.413.4350

Eastern Panhandle Office

1209 N. Queen Street
Martinsburg, WV 25404

P: 304.901.7788

Email:
Let's Connect:

Join Our E-Mail List
* indicates required

Site Map | All Rights Reserved. Privacy and Legal Info | Site design by The Stick Co.