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from https://moneywise.com/investing/real-estate/owning-real-estate-passive-income-myths-investing-how-plotify-can-make-it-work

Owning real estate for passive income is one of the biggest myths in
investing — but here’s how you can actually make it work
Too many investors slowly watch their passive-income plan become a
part-time job.

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Vawn Himmelsbach
By Vawn Himmelsbach
Oct. 04, 2023

5 min read
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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.

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.

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.

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.

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.

About the Author
Vawn Himmelsbach
Vawn Himmelsbach
Freelance Contributor
Vawn Himmelsbach is an experienced freelance writer and editor since
2001. She has contributed to various publications, such as The Globe and
Mail, Toronto Star, National Post, CBC, Moneywise, Zoomer, Wheels, CAA Magazine, Explore Magazine, Canadian Traveller, Travelweek, WestJet
Magazine, Ottawa Life, Flare, and Consumer Reports. In addition to
these, Vawn is a senior contributing editor of BOLD Magazine, a custom
content writer, and copy editor. Moreover, she has previously worked as
a freelance page designer for Metro News and is a co-founder of Chic
Savvy Travels, a travel website for women.

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