Passive Income Through Property? The 6 Pillars Of Earning Without The 9-to-5

Are you tired of the daily grind of the 9-to-5, and longing for a way to generate passive income? Look no further than the world of property investment. In this article, we will explore the six pillars of earning passive income through property, providing you with valuable insights and strategies to help you achieve financial freedom. Whether you’re a seasoned investor or just starting out, these pillars will serve as a comprehensive guide to building wealth through real estate. Get ready to step into the world of passive income and unlock the potential of property investment.

Pillar 1: Rental Income

The Basics of Rental Income

Rental income is one of the most popular ways to earn passive income through real estate. It involves purchasing a property and renting it out to tenants in exchange for regular rental payments. This can be a great source of steady income, especially if you have a desirable property in a high-demand area.

To start earning rental income, you first need to invest in a property that you can rent out. This can be a house, apartment, or commercial space, depending on your preferences and budget. Once you have the property, you can advertise it to attract potential tenants.

Understanding Rental Property Types

There are different types of rental properties, each with its own advantages and considerations. Residential rental properties are the most common, and they include single-family homes, apartments, and condos. Commercial rental properties, on the other hand, are used for business purposes and can include office spaces, retail stores, and warehouses.

When choosing a rental property, it’s important to consider factors such as location, market demand, and potential rental income. Residential properties are generally easier to manage and attract a wider pool of tenants, while commercial properties can offer higher rental rates but may require more maintenance and specialized knowledge.

Calculating Rental Yield

Rental yield is a key metric for assessing the profitability of a rental property. It is calculated by dividing the annual rental income by the property’s value and multiplying by 100 to get a percentage.

To calculate rental yield, you need to determine the annual rental income, which is the total rental income you can expect to receive in a year. This includes the monthly rent multiplied by 12. Then, you divide this by the property’s value, which is the purchase price plus any additional expenses such as renovations or repairs.

Rental yield helps you determine whether a rental property is worth investing in. A higher rental yield indicates a more profitable investment, while a lower rental yield may indicate that the property may not generate enough income to cover expenses and provide a return on investment.

Finding and Screening Tenants

Once you have a rental property, the next step is to find and screen tenants. Finding tenants can be done through various methods, such as advertising online, using a real estate agent, or posting listings in local newspapers or community boards. It’s important to attract quality tenants who will pay rent on time and take care of the property.

Screening tenants involves verifying their income, employment history, credit score, and rental history. You can also conduct interviews and reference checks to ensure they are responsible and reliable. Screening tenants helps mitigate the risk of renting to individuals who may cause damage to the property or fail to pay rent.

Managing Rental Properties

Managing rental properties involves tasks such as collecting rent, handling maintenance and repairs, and resolving tenant issues. It can be a time-consuming process, especially if you have multiple properties or difficult tenants. However, there are options to make property management easier, such as hiring a property manager or using property management software.

A property manager can handle tasks such as advertising vacancies, screening tenants, collecting rent, and coordinating maintenance and repairs. They can also handle tenant issues and ensure that your rental properties comply with local regulations. Property management software can help streamline processes and automate tasks, making it easier to manage your rental properties efficiently.

Pillar 2: Real Estate Investment Trusts (REITs)

What are REITs?

Real Estate Investment Trusts, or REITs, are companies that own and manage income-generating real estate properties. They allow individual investors to invest in real estate without directly owning and managing properties themselves. By investing in REITs, you can earn income through rental payments and property appreciation.

REITs are required to distribute a significant portion of their income to shareholders in the form of dividends. This makes them an attractive investment option for those seeking regular income from real estate without the hassle of property management.

Types of REITs

There are different types of REITs that specialize in different types of real estate properties. Some common types include:

1. Residential REITs: These focus on residential properties such as apartments, single-family homes, and student housing.
2. Commercial REITs: These invest in commercial properties such as office buildings, shopping malls, and industrial facilities.
3. Retail REITs: These own and manage retail properties, including shopping centers and strip malls.
4. Healthcare REITs: These specialize in healthcare-related properties such as hospitals, medical offices, and senior living facilities.

It’s important to research and choose the type of REIT that aligns with your investment goals and risk tolerance.

Benefits of Investing in REITs

Investing in REITs offers several benefits. Firstly, it provides diversification by allowing you to invest in a portfolio of different properties across various sectors. This helps spread risk and potentially increase returns.

Secondly, REITs offer liquidity, which means you can easily buy and sell REIT shares on stock exchanges. This provides flexibility and allows you to access your investment funds when needed.

Lastly, REITs provide regular income in the form of dividends. Since REITs are required to distribute a significant portion of their income to shareholders, they can be a reliable source of passive income.

Risks Associated with REITs

While investing in REITs can be beneficial, there are also risks to consider. One risk is the volatility of the stock market, as REIT shares can fluctuate in value based on market conditions. This means that the value of your investment can go up or down.

Another risk is the dependence on the performance of the real estate market. If the real estate market experiences a downturn, it can impact the income and value of the properties owned by REITs, potentially affecting your investment returns.

It’s important to do thorough research and consider your risk tolerance before investing in REITs. consulting with a financial advisor can also help you make informed investment decisions.

How to Invest in REITs

Investing in REITs can be done through various methods. One common way is to purchase shares of publicly traded REITs listed on stock exchanges. These can be bought through a brokerage account, similar to buying shares of any other stock.

Another option is to invest in non-traded REITs, which are not publicly traded and typically have higher minimum investment requirements. These can often be purchased directly from the REIT company or through a financial advisor.

Before investing in REITs, it’s important to thoroughly research the specific REITs you are considering, including their performance, track record, and fees. You should also consider your investment goals and risk tolerance to ensure that investing in REITs aligns with your overall investment strategy.

Pillar 3: Real Estate Crowdfunding

What is Real Estate Crowdfunding?

Real estate crowdfunding is a relatively new method of investing in real estate that involves pooling together funds from multiple investors to finance real estate projects. It allows individual investors to invest in real estate opportunities that may have been traditionally only available to institutional investors or high-net-worth individuals.

Real estate crowdfunding platforms act as intermediaries, connecting investors with real estate developers or operators who require funding for their projects. Investors can then choose which projects to invest in based on their preferences and risk tolerance.

How Does Real Estate Crowdfunding Work?

Real estate crowdfunding typically involves four main parties: the investors, the crowdfunding platform, the real estate developer or operator, and the property being funded.

The crowdfunding platform serves as a marketplace where investors can browse and select real estate projects to invest in. They often provide detailed information about the projects, including the location, expected returns, and the track record of the developer.

Investors can then choose to invest a certain amount of money in a specific project. Once the project is fully funded, the real estate developer can proceed with the project, and investors become shareholders or lenders, depending on the structure of the investment.

As the project progresses, investors may receive regular updates from the developer and can potentially earn returns from rental income or property appreciation. Some crowdfunding platforms also provide opportunities to exit the investment early by selling their shares to other investors.

Benefits of Real Estate Crowdfunding

Real estate crowdfunding offers several benefits for investors. Firstly, it provides access to a wider range of real estate opportunities that may have higher potential returns compared to traditional investment options. This allows investors to diversify their portfolios and potentially increase their overall investment returns.

Secondly, crowdfunding platforms often conduct thorough due diligence on the real estate projects they list, ensuring that investors have access to vetted investment opportunities. This can help mitigate some of the risks associated with investing in real estate.

Finally, real estate crowdfunding allows investors to invest with smaller amounts of money compared to traditional real estate investments. This makes it more accessible for individuals who may not have the capital to invest in a property on their own.

Risks of Real Estate Crowdfunding

As with any investment, real estate crowdfunding comes with its own set of risks. One risk is the potential for the real estate project to underperform or not generate the expected returns. This can be due to factors such as changes in market conditions, delays in construction, or mismanagement by the developer.

Another risk is the lack of liquidity. Unlike publicly traded REITs or stocks, real estate crowdfunding investments are often illiquid, meaning it can be difficult to sell your investment if you need to access your funds quickly. It’s important to have a long-term investment horizon and be prepared to hold your investment until the project is completed or an exit opportunity arises.

Additionally, crowdfunding platforms may not be regulated to the same extent as traditional financial institutions, which can pose risks in terms of investor protection and transparency. It’s important to research and choose reputable crowdfunding platforms that have a track record of successful projects and satisfied investors.

Selecting a Real Estate Crowdfunding Platform

When investing in real estate crowdfunding, it’s crucial to choose a reputable platform that aligns with your investment goals and risk tolerance. Here are some factors to consider when selecting a platform:

1. Track record: Look for platforms with a proven track record of successfully funded projects and satisfied investors. Research the platform’s history and consider their experience in the real estate sector.

2. Due diligence process: Find out how the platform conducts due diligence on the projects they list. Look for platforms that thoroughly vet projects and provide detailed information to investors.

3. Transparency and communication: Consider how transparent the platform is in terms of providing project updates and information to investors. Good communication can help investors stay informed about their investments.

4. Investor protection: Research the platform’s investor protection measures, such as escrow accounts or third-party oversight. It’s important to understand what safeguards are in place to protect your investment.

5. Fees: Consider the fees charged by the platform, including any upfront fees or ongoing management fees. Make sure you understand how these fees can impact your investment returns.

By thoroughly researching and selecting a reputable crowdfunding platform, you can enhance your chances of investing in successful real estate projects and earning passive income.

Pillar 4: Real Estate Development

The Basics of Real Estate Development

Real estate development involves the purchase of land or existing properties for the purpose of creating new buildings or improving existing ones. Development projects can range from single-family homes to large-scale commercial or residential complexes. Real estate developers take on the responsibility of planning, financing, and executing these projects.

Developers are involved in every stage of the development process, from acquiring the property and obtaining necessary permits and approvals to designing the project and overseeing construction. The goal is to create properties that meet market demands, generate profit, and enhance the surrounding community.

Types of Real Estate Development

Real estate development encompasses various types of projects, each with its own considerations and requirements. Some common types of real estate development include:

1. Residential development: This involves the construction of single-family homes, townhouses, apartments, or condominiums. Residential development can range from small-scale projects to large master-planned communities.

2. Commercial development: This includes the construction of office buildings, shopping centers, hotels, or industrial facilities. Commercial development often requires market analysis and careful consideration of location and demand.

3. Mixed-use development: This type of development combines residential, commercial, and sometimes even recreational or cultural elements into a single project. Mixed-use developments aim to create vibrant communities where people can live, work, and socialize.

4. Industrial development: Industrial development focuses on creating properties for manufacturing, warehousing, or distribution purposes. These projects often require large tracts of land and specialized infrastructure.

5. Redevelopment: Redevelopment involves revitalizing existing properties or areas that have become obsolete or run-down. This can include renovating old buildings, repurposing underutilized spaces, or transforming industrial sites into mixed-use developments.

Steps Involved in Real Estate Development

Real estate development projects typically involve a series of steps, which can vary depending on the project’s size and complexity. Here are some common steps involved in the development process:

1. Site acquisition: Developers identify and acquire suitable properties for their projects. This can involve negotiating purchase agreements, conducting due diligence to assess the property’s feasibility, and obtaining necessary financing.

2. Feasibility analysis: Developers conduct a detailed analysis of the site’s potential, considering factors such as market demand, zoning regulations, environmental impact, and financial feasibility. This helps determine whether the project is viable and can generate a profit.

3. Design and planning: Once the project’s feasibility is established, architects and engineers create the design and plans for the development. This includes creating blueprints, obtaining necessary permits and approvals, and ensuring compliance with building codes and regulations.

4. Financing: Real estate development projects require significant capital. Developers secure financing through various sources, such as loans, equity partnerships, or crowdfunding. This helps cover the costs associated with land acquisition, construction, and other project expenses.

5. Construction: With financing in place, the construction phase begins. Contractors, subcontractors, and construction crews are hired to carry out the building process according to the project’s plans and specifications.

6. Marketing and leasing/sales: Once construction is complete, developers focus on marketing and leasing or selling the project. This involves advertising the properties, showcasing model units or spaces, and negotiating lease or sale agreements with prospective tenants or buyers.

7. Operations and management: After the development is fully occupied, developers may continue to play a role in the ongoing management and operations of the property. This can include property maintenance, tenant relations, and ensuring compliance with regulations.

Financing Real Estate Development

Financing plays a crucial role in real estate development, as it provides the capital needed to acquire land, fund construction, and cover other project expenses. There are various financing options available to developers, depending on the project’s size, scope, and financial requirements.

Some common financing options for real estate development include:

1. Traditional bank loans: Developers can secure loans from banks or financial institutions to finance their projects. These loans typically require collateral and have specific terms and conditions, such as interest rates and repayment schedules.

2. Equity investment: Developers can seek equity partners who contribute capital in exchange for a share of ownership in the project. Equity investors can include individuals, private equity firms, or real estate investment companies.

3. Government programs and incentives: Governments and municipalities often offer programs and incentives to encourage real estate development. These can include grants, tax breaks, or low-interest loans that help offset project costs.

4. Crowdfunding: Real estate crowdfunding platforms can also be used to finance development projects. Developers can raise funds from individual investors in exchange for a share of ownership or a fixed return on investment.

It’s important for developers to carefully evaluate their financing options and choose the ones that best align with their project’s needs and financial goals. Working with financial advisors or real estate professionals can help navigate the complex financing process.

Managing Real Estate Development Projects

Managing real estate development projects requires careful coordination and oversight to ensure successful completion. Developers oversee various aspects of the project, including managing timelines, budgets, and teams of professionals involved in design, construction, and marketing.

Effective project management involves:

1. Setting clear goals and objectives for the project, including budget, timeline, and quality standards.
2. Assembling a team of professionals, including architects, engineers, contractors, and marketing specialists.
3. Creating and maintaining a project schedule, identifying critical milestones, and monitoring progress.
4. Managing project finances, including tracking expenses, reviewing budgets, and addressing any financial challenges.
5. Addressing issues and conflicts that may arise during the development process, such as design changes, construction delays, or zoning challenges.
6. Communicating and collaborating with stakeholders, including investors, contractors, government agencies, and community members.
7. Ensuring compliance with building codes, permits, and regulations throughout the project.
8. Conducting regular site visits and inspections to ensure construction quality and address any issues or concerns.
9. Overseeing marketing and leasing/sales activities to attract tenants or buyers to the completed project.
10. Monitoring the completed project’s performance, addressing any post-construction issues, and implementing ongoing maintenance and property management strategies.

Developers can choose to manage the project themselves or hire project management professionals to handle the day-to-day operations. Effective project management is crucial to ensure that real estate development projects are completed on time, within budget, and meet the desired objectives.

Pillar 5: Real Estate Investment Partnerships

Understanding Real Estate Investment Partnerships

Real estate investment partnerships involve multiple individuals pooling their resources and knowledge to invest in real estate properties. This collaboration allows investors to access larger or more lucrative real estate opportunities that may be out of reach on an individual basis.

Investment partnerships can take various forms, such as joint ventures, limited partnerships, or syndications. Each structure has its own characteristics and considerations, depending on factors such as the number of partners, the level of involvement, and the distribution of profits and risks.

By partnering with others, investors can benefit from shared expertise, increased purchasing power, and the ability to spread risk across multiple properties.

Benefits of Real Estate Investment Partnerships

Real estate investment partnerships offer several benefits for investors. Here are some of the key advantages:

1. Access to larger deals: By pooling resources, investors can access larger real estate deals that may be too costly or risky to pursue individually. This allows them to diversify their portfolios and potentially increase their investment returns.

2. Shared expertise: Real estate partnerships bring together individuals with different skills and knowledge, such as finance, property management, or market analysis. This collective expertise can help mitigate risks and make more informed investment decisions.

3. Reduced financial burden: Investing in real estate can require significant capital. By partnering with others, investors can share the financial burden, making it more accessible and reducing individual financial risks.

4. Networking opportunities: Real estate partnerships can provide access to a wider network of industry professionals, including brokers, lenders, and contractors. This can create new opportunities for finding deals, obtaining financing, and securing reliable service providers.

5. Shared responsibilities: Real estate investment partnerships allow investors to share the responsibilities of property management, maintenance, and tenant relations. This can free up time and resources for investors who may not have the capacity to manage properties on their own.

Selecting the Right Investment Partners

Choosing the right investment partners is crucial to the success of a real estate investment partnership. Here are some factors to consider when selecting partners:

1. Complementary skills and expertise: Look for partners whose skills and expertise complement your own. For example, if you have experience in property management, you may benefit from partnering with someone who has financial or legal expertise.

2. Shared goals and investment strategy: Ensure that your investment partners have similar investment goals and strategies. This includes factors such as risk tolerance, desired investment returns, and investment timelines.

3. Trust and compatibility: Building a real estate investment partnership requires trust and compatibility. It’s important to assess each partner’s track record, reputation, and ability to work well as a team.

4. Clear communication and decision-making processes: Establish clear communication channels and decision-making processes within the partnership. This includes determining how investment decisions will be made, how profits and losses will be distributed, and how conflicts or disagreements will be resolved.

It’s advisable to seek legal and financial advice when structuring a real estate investment partnership. This can help ensure that all parties are protected and that the partnership is set up in a way that aligns with legal and regulatory requirements.

Structuring Real Estate Investment Partnerships

Real estate investment partnerships can be structured in various ways, depending on the specific goals, needs, and preferences of the partners involved. Here are some common structures:

1. Joint ventures: In a joint venture, partners come together to form a separate legal entity to own and manage the real estate investment. Each partner contributes capital and expertise, and profits and losses are typically distributed according to the partners’ ownership percentages.

2. Limited partnerships: Limited partnerships consist of general partners and limited partners. General partners have management responsibilities and unlimited liability, while limited partners have limited liability but limited involvement in the day-to-day operations. Profits and losses are distributed according to the partners’ ownership percentages.

3. Syndications: Real estate syndications involve a sponsor or syndicator who recruits investors to invest in a specific real estate project or deal. The syndicator manages the project and typically receives a share of the profits as compensation. Syndications can offer passive investment opportunities for investors who want to be less involved in the management.

When structuring a real estate investment partnership, it’s important to consult with legal and financial professionals who can provide guidance on the most appropriate structure for your specific needs and comply with applicable laws and regulations.

Managing and Exiting Real Estate Investment Partnerships

Once a real estate investment partnership is established, effective management is essential to ensure its success. Here are some key considerations for managing and exiting real estate investment partnerships:

1. Clear roles and responsibilities: Clearly define the roles and responsibilities of each partner within the partnership. This includes tasks related to property management, decision-making, financial management, and communication.

2. Regular communication and reporting: Establish regular communication channels and reporting requirements to keep all partners informed about the progress of the investments. This can include financial statements, property updates, and performance reports.

3. Ongoing financial management: Implement financial management processes to track income, expenses, and distributions to partners. This includes maintaining accurate financial records, addressing tax requirements, and ensuring compliance with partnership agreements.

4. Exit strategies and agreements: Plan and document exit strategies in advance to address potential scenarios such as partners wanting to sell their interests or exit the partnership. This includes buy-sell agreements, valuation methods, and dispute resolution mechanisms.

5. Performance evaluation and adjustment: Regularly evaluate the performance of the partnership and the individual investments. This includes assessing investment returns, market conditions, and the overall alignment of the partnership with its goals and objectives. Adjustments may be needed to optimize performance and address changing market dynamics.

Proper management and communication within a real estate investment partnership are crucial to maintain trust and maximize returns. When it comes time to exit the partnership, having clear agreements and strategies in place can help facilitate a smooth transition.

Pillar 6: Short-Term Rentals

Introduction to Short-Term Rentals

Short-term rentals, also known as vacation rentals or holiday rentals, involve renting out a property for a short period, typically less than 30 days. This can include renting out a spare room, an entire house, or even a vacation property to travelers or temporary residents.

Short-term rentals have gained popularity in recent years, thanks to the rise of platforms such as Airbnb, HomeAway, and VRBO. These platforms make it easy for property owners to advertise their properties and connect with potential guests.

Listing and Marketing Your Property

To start earning income from short-term rentals, you need to list and market your property effectively. Here are some tips:

1. Create an appealing listing: Take high-quality photos of your property that showcase its best features and amenities. Write a detailed and accurate description that highlights the unique selling points of your property.

2. Set competitive pricing: Research similar properties in your area to determine the appropriate pricing for your short-term rental. Consider factors such as location, amenities, and market demand.

3. Optimize your listing: Use relevant keywords in your listing title and description to improve visibility in search results. Regularly update your calendar and availability to attract potential guests.

4. Provide clear and responsive communication: Respond promptly to inquiries and booking requests. Be helpful and clear in your communication to build trust and establish positive guest relationships.

5. Offer exceptional guest experiences: Provide a clean and well-maintained property for guests. Consider offering additional amenities, such as Wi-Fi, parking, or complimentary toiletries, to enhance the guest experience.

6. Request guest reviews: Encourage guests to leave reviews after their stay. Positive reviews can boost your property’s reputation and attract more bookings.

7. Leverage social media and online marketing: Promote your short-term rental on social media platforms and through online marketing channels. Consider creating a dedicated website or blog to showcase your property and attract potential guests.

Managing Short-Term Rental Bookings

Managing short-term rental bookings involves various tasks to ensure a smooth experience for both guests and property owners. Here are some important aspects to consider:

1. Booking and reservation management: Set up a system to manage bookings and reservations. This can include using a calendar and booking platform to track availability, accept bookings, and process payments.

2. Check-in and check-out procedures: Establish clear check-in and check-out procedures to provide a seamless experience for guests. This can include providing detailed instructions, keyless entry systems, or key exchanges.

3. Cleaning and maintenance: Ensure that your property is clean and well-maintained between guest stays. Regularly schedule professional cleanings and inspections to address any maintenance issues promptly.

4. Guest communication and support: Be responsive and accessible to guests throughout their stay. Provide clear instructions for emergencies or issues that may arise during their time at your property.

5. Compliance with regulations: Familiarize yourself with local regulations and any requirements or restrictions on short-term rentals. This can include zoning rules, occupancy limits, and tax obligations.

6. Safety and security: Implement safety measures to ensure the well-being of your guests. This can include installing smoke detectors, fire extinguishers, and secure locks. Provide emergency contact information for guests to use if needed.

Short-Term Rental Regulations and Legal Considerations

Short-term rentals are subject to various regulations and legal considerations, which can vary depending on your location. It’s important to research and comply with any applicable laws or restrictions in your area. Some common legal considerations include:

1. Zoning and permit requirements: Many jurisdictions have specific zoning regulations that dictate where short-term rentals are allowed. Some may require permits or licenses to operate legally.

2. Tax obligations: Short-term rental income is generally taxable. Research and comply with local tax requirements, which may include occupancy taxes, sales taxes, or income taxes.

3. Insurance coverage: Consider obtaining appropriate insurance coverage for your short-term rental. This can protect you in case of property damage, liability claims, or other unforeseen events.

4. Homeowner association (HOA) rules: If you live in a community governed by a homeowner association, review the HOA’s rules and bylaws to ensure that short-term rentals are allowed.

5. Health and safety regulations: Follow health and safety guidelines to ensure a safe environment for your guests. This can include providing appropriate emergency exits, smoke detectors, and complying with fire codes.

Consulting with legal, tax, or real estate professionals can help ensure that you understand and comply with all relevant regulations and legal obligations.

Maximizing Profitability with Short-Term Rentals

To maximize profitability with short-term rentals, consider the following strategies:

1. Optimize pricing: Regularly review and adjust your pricing based on demand, seasonality, and local market conditions. Consider peak periods, events, or holidays when setting your rates.

2. Minimize vacancy periods: Keep your property occupied as much as possible by managing availability, offering competitive pricing, and promoting your listing effectively.

3. Focus on guest satisfaction: Prioritize guest satisfaction to generate positive reviews and encourage repeat bookings. Provide excellent customer service, respond promptly to inquiries and issues, and address guest feedback constructively.

4. Offer additional services: Consider offering additional services or amenities to increase the attractiveness of your property. This can include airport pickups, access to local attractions, or partnerships with local businesses.

5. Build a strong online presence: Enhance your online visibility and attract more guests by leveraging social media, creating a website or blog, and engaging with potential guests through online communities or forums.

6. Streamline operations: Utilize available tools and technology to streamline your operations. This can include property management software, online booking platforms, and automated messaging systems.

7. Continually improve your property: Regularly invest in property improvements to maintain high guest satisfaction and attract more bookings. This can include updating furnishings, enhancing amenities, or implementing energy-efficient measures.

By implementing these strategies and staying informed about market trends, you can optimize the profitability of your short-term rental and generate sustainable income.

In conclusion, these six pillars of earning passive income through real estate offer a range of opportunities for investors. Whether you choose to generate rental income, invest in REITs, participate in real estate crowdfunding, engage in real estate development, form investment partnerships, or explore short-term rentals, each pillar has its own benefits and considerations. By understanding the basics, conducting thorough research, and seeking professional advice when needed, you can build a solid foundation for earning passive income through property. Remember, real estate investing requires patience, diligence, and continuous learning, but the potential rewards can be substantial.