The variety of options for investing in real estate has expanded considerably in recent years with the popularity of investment via crowdfunding. This is making it easier for small investors to become involved in the market and to explore the possibilities of passive investment. The strength of the commercial market in recent years makes this type of investment a good idea, for a number of reasons.
According to the IRS, there are only two sources for passive income: rental activity or a business in which the taxpayer does not materially participate. Gain on a partial or entire disposition of a passive activity generally is also passive income.
While not as entirely restful as it sounds, passive investing in real estate can be a smart way to generate income with little regular effort. It’s basically income derived from a property in which the investor does not “materially participate.” For many investors, this approach makes sense, given the performance of passive assets compared with active investment options in the last few years.
One reason why passive real estate investment is currently so attractive is the accessibility of a huge range of properties. The use of technology and crowdfunding are putting deals from across the country in front of prospective investors, increasing their options. With access to these tools, it’s easier for investors to find the deal that suits them best.
A carefully selected property that is well managed will most likely only appreciate in value, without any effort to that end from the investor. This is not necessarily the case with other, more active, investments. Passive real estate investment can be an effective hedge against inflation.
Read the entire article posted at Seeking Alpha.