If you’re looking to build financial freedom, passive real estate investing may be the way to go. However, this investment strategy is not for everyone. It’s important to understand the pros and cons of this type of investing before making a decision.
Passive real estate investing involves acquiring a stake in a property with the intent of receiving periodic distributions of cash without having to do any work on the property. Investors can also benefit from tax advantages and participate in the upside if the value of the property appreciates. This type of investing is best suited for investors who do not have the time or ability to actively manage a rental property themselves.
One popular method of passively investing in real estate is through crowdfunding platforms. These sites allow investors to pool money together in order to purchase income-generating properties such as apartments or single family homes. In return, investors receive cash distributions and can earn from property appreciation and eventual sale.
Another option for passive real estate investing is to partner with a private equity firm. These firms have the experience, resources, and relationships necessary to source, acquire, and operate institutional quality commercial real estate. Investors can partner with a firm and receive fractional ownership of a property in return for capital contributions and periodic distributions of cash.
Investing in turnkey rental properties is also an option for passive real estate investing. This type of investing allows an individual to invest in a property that has already been rehabbed and is ready to be occupied. The advantage to this type of investment is that there is less upfront risk and the property management company will take care of all day-to-day operations. However, there are still fees involved with this type of investing such as leasing fees, property management fees, and maintenance fees.
In addition to passively investing in a property, an individual can also invest in a REIT or a real estate mutual fund. These professionally-managed funds offer diversification across a portfolio of properties and are typically publicly traded. However, it’s important to remember that even these vehicles are not completely passive as the funds must be vetted for quality and returns.
It is important to consider the level of involvement and risk associated with each type of passive real estate investing before making a decision. It’s also important to note that no investing strategy is suitable for everyone. For those who have a strong desire to own their own rental property but don’t have the time or capital to actively manage it, passive real estate investing may be a good option. Just make sure to do your research and use a platform like Mint to easily track all of your investments in one place. That way, you can ensure that your goals are being met. Good luck!