Discover Lucrative Alternatives to Rental Property Investment in 2024

Real estate remains among the best passive income investments. Still, direct ownership of traditional rental property can be fraught with drawbacks, including simply being out of the financial reach of the ordinary investor. Short Notes are a compelling alternative to those traditional income-generating investments.

Come along as we outline the challenges of managing rental properties, the rising demand for alternative real estate investments, and the benefits of Short Notes as an alternative real estate investment.

The Desire for Passive Income

Passive income is money you earn with little to no effort - it doesn’t come from traditional active work. Examples of passive income can include dividends, bonds, crypto staking, and, of course, rental property.

Many investors purchase properties to rent or lease them and to start collecting passive income. Monies collected from tenants usually more than cover expenses and real estate appreciates. But, and there’s always a but, there are pitfalls to rental properties.

The most significant challenge is that rental properties require hands-on management. Unless an investor hires a property manager, they are tasked with building maintenance and repairs and collecting rent. It’s not uncommon for unplanned repair costs to crop up, particularly if a professional doesn’t carefully vet and inspect the property. A potential moneymaker can turn into a money pit.

Challenges in rental properties

Owning rental properties is a reasonable investment strategy. Rent money provides cash flow, and historically, property appreciates. However, property ownership has significant challenges. Let’s take a look at a few of them.

Owning and maintaining rental property

Lost income due to default on rent

Tenants who can’t or won’t pay their rent are the most significant risk for those who own rental properties. Even late rents place substantial stress on property owners and can start a cascade of failures. As a property owner, you still have the financial responsibilities of paying the mortgage, taking care of taxes, and shouldering maintenance costs whether your tenants have paid or not. The buck stops with you. And if you’ve counted on rental income to make all these payments, the failure of tenants to honor their obligations can put you in a terrible position.

Understanding landlord tenant laws

You must understand that the laws surrounding owning a primary residence and owning income-generating investments like rental properties are very different and ever-changing. These laws include rent control, tenant screenings, rent collection, and security deposits. Local, state, and federal laws are fluid and often reflect current affairs.

For example, during the pandemic, eviction protection measures were enacted, and while they helped tenants, property owners were still on the hook to pay their bills without the rental income.

Maintaining a positive cash flow

Failure of tenants to pay rent isn’t the only thing that can negatively affect cash flow. A rental vacancy also doesn’t make the property owner any money. Vacancies aren’t unusual, and every property owner faces periods when units are empty. The key is to find the right tenant in the shortest amount of time - to balance filling space with renters quickly but not so quickly that a problem tenant moves in.

Unexpected maintenance costs

Nothing in life is 100% predictable, and unexpected maintenance and repair costs will crop up. A wise property owner will have set aside anywhere from 5% to 20% of the rental income to pay for bills. One of the challenges to keeping this pot of money substantial enough is that expected bills such as taxes and the mortgage can quietly whittle away the balance.

Demand for real estate alternative investments

Despite some challenges, real estate remains among the best income-generating investments. Investors who don’t want the challenges of direct property ownership or who are just getting their feet wet started to look at alternative real estate investments, including preferred equity offerings, real estate investment trusts (REITs), interval or other income funds, and short notes.

According to American global commercial real estate services firm Cushman and Wakefield, alternative investment sectors have grabbed a significant share of commercial real estate investment. That dollar number totaled $289 billion from 2020 to 2023, a staggering 79% increase.

The factors driving this remarkable increase in interest in real estate alternative investment options include:

  • Real estate is one of the best passive income investments, providing a steady income stream.

  • Investors can be hands-off and leave property and fund management to professionals.

  • Passive investing in real estate adds a layer of protection to a portfolio through diversification.

  • Portfolio hedging due to a lack of ties to the stock and bond market. Portfolio volatility is potentially reduced during fluctuations in the economy.

  • Real estate is a tangible asset that appreciates.

  • Inflation hedging through dividend increases and real estate appreciation.

Short Notes fund real estate construction

Introducing Short Notes

Investors researching how to make passive income have realized that real estate Short Notes are a good option. So, what exactly is a short note, and how does it work?

Connect Invest raises investor funds through Short Notes, and then manages the funds on behalf of investors, investing the funds into a diverse portfolio of active real estate developments throughout the US. This effectively streamlines the process of real estate construction investing for investors.

Alternative real estate investments, in general, and Short Notes are excellent investment strategies for beginner or ordinary investors considering income-generating investments without shouldering the burden of direct ownership. Connect Invest’s Short Notes provide this opportunity.

Accessibility is the foundation of Connect Invest’s mission. Our goal is to make the benefits of real estate investing more accessible compared to traditional methods, such as direct ownership and renting of property, house hacking, flipping homes, or funding singular real estate debt loans that lack a defined exit date.

Connect Invest’s collateral-backed offerings are available to accredited and non-accredited investors, and the minimum investment is as low as $500. Each note has a defined exit date, is easily accessible, and offers monthly passive income with a fixed rate. Real estate investments are highly recommended as a method to diversify your portfolio.

Parting Words

Unlike the active involvement required in owning and maintaining rental properties, investing passively in real estate through Short Notes provides effortless returns for investors. With fixed-rate dividends, you can say goodbye to worrying about volatile APY rates.

What makes Short Notes truly appealing is their accessibility. With limited requirements to sign up and a low minimum investment amount, Short Notes are the ideal avenue for investors looking to embark on the journey to financial independence and passive income.

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