American entrepreneur, Jim Rohn once said, “Time is more valuable than money. You can get more money, but you cannot get more time.” What if we tell you, you can make the most of both?
Real estate is a profitable investment vehicle that acts as a corpus fund in times of financial distress. It offers tax advantages, while allowing you to enjoy a consistent cash flow. And the best part is, you don’t have to be rich to get started. But there are not just one or two ways to invest in real estate but plenty of them.
The real trick is to figure out which one is right for you. And while active real estate investment is an obvious choice for many, Passive Real Estate Investment isn’t something that everyone is fully aware of.
Let’s understand how Passive Real Estate Investment is taking over.
| What is Passive Real Estate Investment? Investing in a property without being actively involved in its management is known as Passive Real Estate Investment. As a property owner, all you have to do is invest and let professionals take care of the rest. It allows you to attain a regular flow of income without putting in a substantial amount of time and effort. |
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Making Surplus Money
Before digging deeper into the Passive Investment pool, answer this simple question. Do you naturally gravitate towards doing things hands-on, or do you prefer someone else handling things for you?
If you are a hands-on person, we would recommend an Active Real Estate Investment.
From listing the property to managing tenants and being in charge of all the work – you will be doing everything on your own.
If you prefer the hands-off approach, i.e. someone else managing things for you, the Passive Real Estate Investment comes into the picture. In simple words, you work with a team of professionals or investment companies that manage the property on your behalf. They invest via online crowdfunding, real estate investment trusts, individual real estate funds, syndications and other methods.
Active V/s Passive Real Estate Investing
Here is a quick comparison between the active and passive forms of real estate investing.
| Active Real Estate Investing | Passive Real Estate Investing |
| Direct Control | No Direct Control |
| More Time Commitment | Lesser Time Commitment |
| More Risk | Less Risk |
| Limited Scope of Diversification | Greater Scope of Diversification |
Types of Passive Real Estate Investment
There are two types of Passive Real Estate Investment through which potential buyers can invest in the realty sector.
Direct Passive Real Estate Investment
Direct Real Estate Investing is when an investor buys a property and then rents it out. Additionally, the investor hires a Property Manager who is responsible for maintenance and routine handlings, such as repairs and rent collection.
Indirect Passive Real Estate Investment
When an individual invests in a Real Estate Investment Trust (REIT), it is referred to as “Indirect Investment”. REITs are for people who don’t have enough time to take care of investments by themselves, such as for operating or managing real estate properties. By investing in REITs, investors can acquire stable returns in the form of dividends.
Popular Forms of Passive Real Estate Investment
Considered a smart way to invest, Passive Real Estate Investing can be done in multiple ways.
Crowdfunding
When a group of investors collectively contribute a certain amount of money, it is known as crowdfunding. It is a preferable choice because with the pooled funds, investors get the opportunity to make larger investments than they could ever make individually.
Turnkey Rental Property
This is a relatively active form of Passive Property Investment. It is known for offering a steady flow of income to investors. A “turnkey” property is one that has been renovated and is either ready to move or has already been rented. It is managed by a Property Manager, which means everything from repairs to rent collection is taken care of.
This is one of the easiest Real Estate Passive Investing methods. It requires minimal legwork and is an excellent source for earning money.
Real Estate Funds
Real Estate funds are a kind of mutual fund investment that mainly focus on real estate. These funds are invested in REITs and offer varied benefits that may appeal to potential passive investors. It is an option that provides excellent diversification and mostly results in higher returns and reduced risks. A major chunk of these funds is invested in commercial real estate properties such as offices, malls, etc.
| Benefits of Passive Real Estate Investment |
| Steady Income: When done in the right way, Passive Real Estate Investment provides you with a reliable and steady flow of income. |
| Less Risk, Greater Returns: When you invest in multiple locations at once, not only does it allow you to diversify your portfolio but also mitigates the risk. You do not have to wait to acquire returns from a single location, you can get financial gains from any of your investments. |
| No Maintenance Headaches: Giving control of your investment operations to professionals helps you attain a sense of assurance and takes the weight off your shoulders. |
What Makes it a Profitable Side Hustle?
The reason why more and more people are enticed towards Passive Real Estate Investment is – no or minimal involvement.
It is not a regular job where you have to work for 9 hours to make money. It is, in fact, the opposite. It allows you to make money even when you aren’t working.
Apart from earning regular salaries, millennials these days are always looking for ways to make extra income. And Passive Real Estate Investment gives them the freedom to earn money whilst holding on to their existing jobs.
Wrapping Up
Just sit back and collect your checks while an agent takes care of your investment and property.
But before you do that, take out some time to do thorough research. No doubt, Passive Real Estate Investment has a good share of benefits but don’t forget that no investment can guarantee 100% returns. With the right amount of research and analysis, you can secure the right deal.
