Not everyone who wants to invest in real estate wants to play the role of landlord. Vetting potential tenants, dealing with maintenance issues, and collecting rent payments are time-consuming processes, not to mention stressful. Especially for a non-seasoned investor.
Fortunately, there are successful ways to invest in real estate that offer a more passive role, similar to that of stock investments or annuities. In this article, we’ll review the ways to invest in real estate passively, what the benefits of passive investing are, and what to watch out for when diving into the passive real estate investment world.
Although real estate investment can generate quality risk adjusted returns and the ability to grow your wealth, taking an active role in owning and managing properties isn't for everyone. Alternatives to active real estate investment include:
Partnering with investors who are professionals at an active role in real estate is perhaps the most common way people get into real estate investing. In this structure, the active investor does the legwork of finding the opportunities, managing tenant relations, and rent collection while you provide the investment capital to enable access to larger or more assets than the investor would have by themselves.
While these investments can be lucrative, they also come with significant risks involved, especially if the active real estate investor isn’t experienced and/or doesn’t have many properties in their investment portfolio to distribute risk.
Crowdfunding for real estate has exploded in popularity in recent years. Similar to Kickstarter-style crowdfunding, platforms like Fundrise enable small-scale investors to get into the real estate world with relatively low initial investments.
These platforms typically don’t provide anywhere near the level of transparency you’d get from individual property investment, but many offer institutional-quality investments with relatively stable returns.
One downside to these types of real estate investments is that you’re only one of tens of thousands of investors, so the experience often has less detailed reporting compared with alternatives like real estate investment funds from Saint Investment Group.
Real estate investment funds are similar to crowdfunding in the sense you pool your capital with other investors to buy into larger real estate investments. Where real estate investment funds differ from crowdfunding is that you gain access to institutional-quality investments with generally greater insight into each opportunity, along with more sophisticated portfolios of properties.
The drawbacks to passive real estate investing are few but could make a difference for some investors. If you’re someone who’s trying to earn the maximum ROI in the least amount of time, passive investing roles aren’t the best option.
Passive real estate investing is better oriented with long-term investment goals and those seeking consistent, solid passive income streams that can be reinvested for secure wealth growth.
Also, for those who love to know every detail of a property investment down to the plumbing, passive investment in real estate isn’t ideal. Typically, more passive roles leave many smaller details out of the decision process for the investor (and most investors prefer it this way).
That said, if you prefer keeping your role simple with monthly statement reviews alone, passive real estate investing such as a fund from Saint Investment Group is an ideal avenue to pursue.
When deciding if passive real estate investing is right for you, it’s important to first ask yourself some key questions relevant to every type of investment.
Many people considering passive real estate investing are interested in diversifying existing portfolios that are heavy in stocks and bonds. Depending on your investment goals and how soon you’ll be retiring, your capital should be allocated accordingly. The team at Saint Investment is here to help you land on the best capital allocation strategy for both your short-term and long-term goals.
Even though passive real estate investment options provide a very low-effort place to put your capital, there’s still some work involved.
Depending on how you choose to invest, whether with an active partner or buying shares of a fund, differing due diligence levels are crucial to accomplishing your investment goals.
Investing with a fund requires the least amount of effort, but it’s important to be sure the fund managers have investing goals that are well-aligned with your own.
The returns you can expect with passive real estate investment can range widely, with higher returns generally requiring higher levels of risk and more active involvement.
While the returns may be slightly lower, many investors find the security and risk-mitigation benefits of passive real estate investment more than compensates for this, as well as the additional benefits of significant diversification.
Are you ready to diversify your portfolio with passive real estate investing? When you want a team of real estate experts that analyze every deal on your side, Saint Investment Group is ready to help you get started. And with detailed reporting and deal transparency, you can earn passive real estate income with peace of mind. Call (323) 483-0291 today to learn how to get started.
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.