Passive Real Estate Investing: What Is It And Is It Right For You?

Passive Real Estate Investing: What Is It And Is It Right For You?

The investment world is full of opportunities you can put your money into. If you like the rollercoaster ride that is the stock market, you can put your money into everything from individual stocks to mutual funds. But there is one type of investing that is unique enough to set it apart from nearly every other opportunity: real estate investing. You can invest either actively or passively.

Active real estate investing involves managing properties yourself. It comes in many flavors:

  • House flippers
  • Commercial landlords
  • Residential landlords
  • Property developers.

Passive real estate investing involves putting up the money but letting someone else manage the investments. For an investor who appreciates real estate but doesn’t want to get into the business of managing it, passive investing is the way to go.

Lots Of Ways To Do It

Passively investing in real estate is not limited to just one way of doing things. There are plenty of options. For example, several investors can pool their money to fund real estate investments by way of hard money lending. Actium Partners is a Salt Lake City, UT firm that does just that. Their loans are short-term loans capable of generating a very nice return.

Here are some of the other possibilities:

  • REITs – People just getting into real estate after heavily investing in traditional securities often look to real estate investment trusts (REITs). A REIT is the real estate version of a mutual fund. Investors put their money into a trust whose managers invest the funds in real estate projects.
  • Crowd Funding – Crowd funding has become a viable alternative to hard money. Passively investing through crowdfunding is an opportunity to get in on the ground floor of new opportunities. The benefit of crowdfunding is that you can get involved even if you only have a little bit to invest.
  • Hiring A Property Manager – Perhaps you want to exclusively own the properties you invest in. You can make it happen by hiring a property manager. You provide the funding while the property manager takes care of the properties for you.

The point is that there are many ways to passively invest in real estate. The question is whether it is right for you. Only you can determine that.

Important Things To Know

The key to determining whether you should invest in real estate is familiarizing yourself with the market. Get to know what types of commercial properties would be available to you. Take the time to dig into supply and demand. Spend time researching historical returns, investment trends, financing options, etc.

Remember that no investment is 100% risk free. Make sure you fully understand the risks before you invest in any opportunity – including real estate.

In terms of the pros of passive real estate investing, consider the following:

  • Real estate tends to appreciate over time
  • It is less subject to market volatility
  • It can generate consistent monthly income
  • It builds equity the longer you hold it.

Passive real estate investing has its cons as well. At the top of the list is its long-term nature. If you are looking for returns within a year or two, real estate probably isn’t your best option. Experts generally recommend holding real estate investments for at least five years. The longer you hold, the better your position.

Passive real estate investing represents a way to make a good return. But it is not for everyone. Now that you know what it is, you have a basis for determining whether it is the opportunity you are looking for.