How to Passively Invest in Real Estate

What’s the difference between being efficient and just being busy? Why is this difference so important and how can you maximize efficiency? Many are swamped and are overwhelmed by it all. Most busy professionals who want to tap into the world of real estate “just don’t have the time.”

These individuals are aware that this market can be very lucrative and offers a chance at building substantial wealth. Nevertheless, they are unable to balance both work life and creating the time to seek an alternative investment. However, to be successful, you must not lose your ability to handle your business.

We will cover passive ways to get into real estate investing, some obviously being more passive than others. For the busiest people this first section is probably not what they are looking for.. 

Direct Ownership of Properties

You can always choose to directly buy different types of real estate which offer different benefits and hurdles, as well to make this more passive it is understood you will hire a property manager to maintain all aspects, for a cost of course. These fees range normally from 2-12%, lower fees being larger/ more unit buildings up to the 8-12% being the norm for single family and smaller unit buildings. Below is a list of different property types and some pros/cons that come along with them. 

 Single Family Homes: Positive(+): these tenants tend to take above average care of properties. Minus (-): If its vacant there no cash coming in.

Duplex/Triplex/Quad: (+) tend to have better cash flow especially if one unit is vacant, you’ll still be bringing in some amount of payment each month.  (-) there is normally more turnover here and primarily the only buyers are other investors if you choose to sell

Apartments/Multifamily: (+) Economies of scale come into play and values of the properties are based on income, meaning any increase in income or decrease in expenses can dramatically increase the value of the building (-) these are much more management intensive, often come with property management in place (which can be a good or bad thing)

Mobile Home Parks: (+) normally lower tenant turnover (-) can be quite capital intensive if any upgrades or repairs are needed to the site. 

Self Storage: (+) no tenant drama (loud neighbors, neighbors don’t mow lawn/trash in lawn etc) (-) Very reliant on management and customer service

Retail/Industrial/Mixed Use: these are all very viable markets with unique knowledge of different niches. Often include longer term tenants and can have longer times between tenants. 

5 comments

  1. This is so well written and so wonderful. Thank you so much for this! Look forward to more of your articles.

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