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Active vs Passive Real Estate Investment

Real estate investing such as residential rentals or commercial properties can provide reliable recurring income and capital appreciation.

The return on real estate may be higher than those of other conventional investments when risk is taken into account. The real estate market is historically a hedge against inflation and has a low correlation to stock market volatility.

It can be intimidating for many people to start investing in real estate. They may not even know where to begin when thinking about options, risks, strategies, and other things to learn.

There are two main ways to invest in real estate—passively and actively—and we will discuss the differences between both investing strategies.

What is Active Real Estate Investing?

In active real estate investing, individuals, entities, or funds are directly involved in the process. In essence, you must dedicate time and capital, and take on risks to be able to invest actively in real estate.

Active real estate investors often exert commitment to the same amount of work as a full-time employee.

What is Passive Real Estate Investing?

One of the major characteristics of the passive real estate approach is that investors receive monthly distributions of cash without any effort on their part.

This means investors are able to reap the benefits of ownership without dealing with the hassle of managing a property on a daily basis and preparing a business plan for it. Furthermore, if the property's value appreciates, they may be eligible to receive significant tax benefits as well.

It's important to note, however, that passive real estate investors are unable to participate in the day-to-day management of the property. As a result, general partners and investment managers can charge fees for managing the property, which can reduce investor profits.

How Do You Choose Between Active and Passive Strategy?

Investment in real estate requires considering a variety of different approaches and strategies. This is where active and passive real estate investing differ—a distinction that many people overlook when they enter the rental property market for the first time.

Passive investing can be distinguished in many ways from active investing in terms of advantages and risks. When trying to choose between a passive and active investment for commercial real estate investing, it is important to consider the following factors:

Available Capital to Invest

An active investment approach usually requires more capital because the down payment must be fully funded by the investor.

It may be possible to come up with a smaller amount in real estate syndication, but the group must come up with it together.

Amount of Time

Active investments demand a much longer period of time than passive ones. It is therefore important for individuals to consider the amount of time it will take to manage their property.

Time is of the essence when it comes to active real estate investing. In addition to your job or business, can you realistically manage more than one or two rental units as a busy professional?

It may be better to invest passively in real estate if you want to achieve scale and sustained wealth.

Operational Expertise

Another aspect of active real estate investing is the need for a higher level of operational expertise. If you have it, you may be a better candidate for active investment.

It may be better to use a passive strategy for those who do not have access to these tools.

Risk Tolerance

The risks associated with active real estate investing are typically higher than those associated with passive real estate investing. If you lack experience and expertise in real estate investing, passive real estate investing might be for you, where a team of professionals will handle all active activities, such as purchase, construction, and ongoing property management.

In addition, passive real estate investments share risks among multiple parties. It won't be your responsibility to find and fund a solution alone if something goes wrong.

How Should You Approach Real Estate Investing?

When it comes to active vs. passive real estate investment, there is no right or wrong answer. You should make your choice based on your personal priorities, your financial capabilities, and your lifestyle.

No matter which path you choose, you can succeed as a real estate investor. Choosing a trusted company to work with can make the process both fulfilling and financially rewarding. Invest with us for safe and secure investments!

For more information about real estate investing, contact us at 949-881-7128 or general@saintinvestment.com today!

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* Information in this message, including information regarding targeted returns and investment performance, is provided by the sponsor of the investment opportunity and is subject to change. Forward-looking statements, hypothetical information or calculations, financial estimates and targeted returns are inherently uncertain. Such information should not be used as a primary basis for an investor’s decision to invest. Investment opportunities on the Saint Platform are speculative and involve substantial risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. Please see additional disclosures here.
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