This article is presented by Connect Invest.
Real estate investing is a great way to get passive income. But what happens when your passive investment requires active attention: your tenant ghosts, your short-term rental occupancy dips, or your rehabilitation takes three months longer than expected?
Unfortunately, vacancy risk is something to consider when it comes to real estate investing. According to U.S. census data, vacancy rates for rental housing stood at 7% for the second quarter of 2025, while rental data from Zillow shows the average rental price is on the decline. And while short-term rentals might have seen an increase in demand over the summer, their general volatility means cash flow isn’t as stable as it might be with other types of passive investments.
For income-focused investors, diversifying how you earn is as important as where you invest. That’s why more landlords are allocating a slice of their portfolio to asset-backed fixed income.
What Is Asset-Backed Fixed Real Estate Income?
With fixed income, you receive cash flow from your holdings, such as rental income. With asset-backed income, instead of owning one asset, your investment is backed by a pool of assets that generate income, such as mortgages or rental income. Financial institutions create these securities by pooling together cash flows generated from different real estate assets, then packaging and selling them to investors in the form of bonds or other securities.
Investors receive a fixed-rate income generated from the underlying properties. These securities might be issued by large developers or even sold off by banks to raise capital. This allows investors to receive steady income without having to manage properties.
Of course, the…