Have Money but No Time ....

So you have money, you want to invest in real estate, but you have no time!

When I meet with individuals that have secured an investable nest egg of 50K to over 500K, the conversation always seems to turn to real estate.  I suppose this is to be expected, given my track record in the real estate business and willingness to help where I can.

Having had this conversation 50+ times now, I feel safe discussing the obstacles, the opportunities, and the options such an investor has.

First, let’s look at the obstacles:

An investor who has cash to invest can become a target, as there are a lot of people itching to get their hands on cash for various investment schemes.  Some of these might sound very appealing, especially given the current environment of low interest rates.  The following scenario crossed my path a year ago or so and is just an example:  

I was offered the opportunity to invest in oil wells through a reputable dealer with promises of returns and riches.  They had all the fancy charts, they threw out a mountain of jargon, and they topped it off with a fancy Excel sheet showing proposed returns that would knock your socks off.

I have to admit that I was impressed and they almost had me.  But then I sat back and asked myself, what do I know about oil wells, drilling, the risks of the industry, etc?  I was also suspicious of the fact that they were hunting for investors in California; there had to be a lot of money in Texas that would chase this deal if it was so profitable.  Plus, I was really put off by all the jargon.  I have a simple rule if you can’t explain something in simple terms, then I suspect you are hiding something.

I did not invest, and a year later I am very happy I didn’t invest. A peer of mine did, and they lost their shirt.  But hey, they have a tax write-off now.

Besides being a target for unsavory deals, the cash investor’s time is limited due to a full life with work, family, and other responsibilities and they just don’t have the bandwidth to research another investment area.  They understand that it takes time and hard work to get good at something, and they just don’t have the time or energy to take on a new area.  

This means that the investor is left holding cash, or worse, gambling in the stock market or chasing the latest hot fad such as gold or international stocks. These options might work out, but they will very likely leave them with less of return and more risk than should be acceptable.

The Opportunities:

As the previous section hinted, the investor with cash has a bunch of options, and it is their job to protect and grow their reserves via careful investment selection.  Given that this article adds the additional caveat of limited to no time, we will remove all the options that require lots of education, daily monitoring, and other headaches.

We will instead focus on the idea of being a passive investor.  The passive investor is by definition not involved in the daily decisions, and when done correctly, simply picks up a check from the mailbox and moves on.  

While the idea of being a passive investor is very appealing to many people, let’s set some ground rules so you don’t get burned.  You need to do some upfront homework before you invest one single penny.

You should look for several things as you review opportunities to invest:

First, you need to find an investor with a documented track record of success.  You need to understand that this investor has done this before, and that they are not one hit wonders who got lucky or simply had good timing once.

Second, you need to understand their investment program, structure, and how everyone is protected and will make money.  As the cash investor, you not only need to understand how you will make money, but you also need to know how the person you are investing with will make money to insure everyone is healthy.   Remember, it needs to be a good deal for both of you or you should run away fast.

Third, if the party you are investing with tries to shower you with fancy jargon, just thank them for their time and leave without investing a dime.  The program you invest in has to be simple to understand or you shouldn’t do it.

In the end there are many opportunities for the cash investor, but you need to look for an experienced team that has a simple program that offers secure profits for both parties. Finally, the investor should be able to describe the program without use of fancy jargon.

The Options:

In the current market, there are very few options that offer secure returns in a well-understood business.  I propose that you should look for real estate investors that are seeking capital, offer a proven track record, and are happy to share their model.

Should you find such an investor, make sure you understand how you both will make money and the investment options available.  

If you do your homework correctly you will set yourself up for mailbox money which is the ultimate goal of the Passive Investor.

Good Investing