BiggerPockets

Regarding "Is there a way for an individual to passively invest in real estate with minimal risk, achieve decent returns; for arguments sake 5-15% and avoid anything related to buying stocks, mutual funds etc?" The answer is yes.

I think you nailed the obvious methods (tax certificates/liens and private lending). In addition, you may consider RE notes and options. Many on BP will say notes (discounted notes) are the way to go. The game is to mitigate risk. For private lending, you can mitigate risk in multiple ways. Making only first position, low LTV loans on already rehabbed, high cash flow property will reduce default risk considerably. Possibly a good target are people with self directed IRAs who bought investment property with cash... who might legerage their investment at (say) 40% or 50% LTV.

Dionte,
There is a lot of risk in lending unless you do a lot of it. It is like insurance. You need to spread the risk out over a large number of people because you will win some and you will loose some.

Also, investing in notes would not be considered fully passive. In order to find the notes, service them and collect when they default is FAR from passive! If everything goes really well and you bought a note through a broker then I suppose it could be fairly passive but we all know this is not a "perfect" business!

If the investment uses recourse financing (where the IRA owner personally guarantees the loan), then the income allocated to the portion of the investment that is financed becomes subject to UBTI.

Soft of defeats the tax advantage the IRA is supposed to provide.

(Note: not an endorsement) One other option (that I no longer do, BTW) is to lend via a peer-peer network like prosper or lendingClub. These sites do some/most(?) of the due diligence and theoretically mitigate their unsecured personal loans. If they ever add the opportunity for secured lending, they will revolutionize hard money lending.

As for risk, I look at avoidance and mitigation (reduction) across: property, management, finances, and entity. Regarding "...additional ways to mitigate risk...", keep a score card on each risk category and develop your own method. I use a table with multiplicative weights to help in my SDIRA lending. For example, I prefer to lend on an already performing property since there is significantly less property risk. If any category is zero, then the (multiplicative) result is zero and an opportunity not worth pursuing. Other examples... you can ask for the property financials and verify the property income has a chance to support the proposed debt financing. If the answer is there is no way to know because we haven't bought the property yet, then maybe you need to see that the company has a history of successes before going forward. The point is to develop your own systems....

Regarding "Are there any firms or companies that offer hands off investing opportunities with a proven track record for obtaining their investors returns with a low loss record?" I'm sure there are, but like a lot of things in this business... it's a matter of finding and vetting them. Serious players should be able to readily provide a history (a resume) of their lending along with supporting links/documents to courthouse records, etc.

Jeffery;

Thanks for the response. I assume that you have done your fair share of private lending. If so what did you specifically look for in the notes or the project or person or company you invested in. And how passive would you say this type of lending has been for you?

I'll try to take a stab at this one although I have never invested with one.

Ive noticed that most Ive seen most HMLs that have websites have some type of informational pdf document or powerpoint presentation or you tube video as an ice breaker. So that would be a start; obtaining some introductory information. If all seems well from the introduction. Then I would do my due diligence on the company. GOOGLE the name of the company and any officers or money managers for complaints/disputes. Then check the bbb and state attorney generals office for outstanding complaints.

Im sure you already know this but you must clearly define your risk tolerance and the type of projects you want to invest in. Hard money I assume is usually risky since the return is so high.

I would ask questions like;

What type of projects do they invest in?

How many properties have you had to foreclose on?

What type of active investors do you lend to? RE investment companies, individuals.

How experienced are the individuals you lend to? What is your lending criteria?

Why should you choose them over any other company?

These are a few I could come up with hope this helps...

Feel free to add!!!

I guess I've never considered joint venture investing as minimal risk. I'd be curious to know how what specific processes, actions, contracts, etc. you use to minimize risk.

Thanks Dionte G., I appreciate the compliment.

I will try to touch on a lot here to answer all I can quick:

Hard money lenders:
I use em, know em very well. To find an expensive one is easy, they have web sites you can find thru google, but they will "fee" you to death. Best way i have found to find a good one, network network network. Everyone is keeping them secret, because they are a literal gold mine.
With a Hard Money lender, they will be interviewing you, not you them. They will want to know why "you" will be a good investment, and how you can proove it. No experience and no rock solid plan = no money. My #1 hard money guy lends me with $0.00 fees, not 1 cent other then points and A.P.R. on the money. It is so rare. I meet him thru a friend investor, who had to introduce me because we were J.V.'ing on a project, lol. I had a track record as a contractor for investors, so I had the plan, the proof, so I got the money.

Start with does not require your money, JV with someone who has money or can get it. Buy on seller financing. Use equity from something you already own. On and on and on.....

See, being a real estate investor has little to do with property, and everything to do with "deal engineering". A real estate investor is full time problem solving super star. Put 10 of us in a room for 20 minutes and we would solve the U.S. economy, world hunger, and probably cure 1/2 of all cancer, lol. We are problem junkies, we love solving the unsolvable and earning great returns doing it.
If that is not you, it is ok, embrace it, and find what you ARE and what way to best invest as that. Hard Money lenders are NOT problem junkies, they HATE problems, lol, and they make very good returns. 1st take stock of who you are, what your are willing to become, then your resources, battle plan, and take action. Recognize, analyize, plan, execute.

As far as risk mitigation goes, more risk = more profit, less risk = less profit. That is a general rule, and there are exceptions, but the exceptions are rare to non existent, and always complicated because it is a solution some problem junkie devised, like redemptions. Redemptions are awesome, but for me to explaine how to do one, lmao, would be a novel.

There is 1 passive investment possability, if your willing to waite a few weeks. Turn key rental investments

My partners and I are opening a new division where we use our banking interests to gain properties, fully rehab them, install a top prop. managment co. we have ties with, install a renter, and we resell them as a full turn key rental investment.
All you (the investor buyer) needs to do, is 1)wake up and breath 2)watch your bank account recieve rent payments 3)write and pay your bills like tax's and payments. thats it. A literal hand feed profiting investment, with all the work done.
We are also working a deal to offer seller financing, so you would need about 10% purchase price out of pocket, which is offset by the deposits you recieve the day you purchase (1st mnth, last mnth, security)

Why are we making this offering? Because EVERYONE wins. We make money on rehab, the investor makes money on renting, managment company makes money on managing. The only looser is the bank, who sells to us at a huge discount....... but....... we ALL paid them already via bail out bucks so...... we all win.

This is truly the ONLY low risk, low work, low investment, easy, verefied, cash producing investment in R.E.I. I know of. If anyone knows difernt, please correct me. Seriously, I have looked and don't know of any legit person doing this.

And yes, i know of other "turn key" systems, everyone I have checked has been a scam of some sort. Requires escrow to bid, we don't, has fees, we don't, has cash flow based upon projections, we have it producing before sale, and so on. We just build em, rent em, have em cash flow producing and 100% hands off, and sell em.
We look at each other every day asking "how could we be the only ones?" but I am reminded, someone has always been first at anything, maybe were just the first at this here.

And yes, we hold some. I could hold all and be greedy, but I figure I can split it 50/50, hold and be greedy on half, and share the wealth on half and earn. I am an open book guy, I make profits on my rehab. If you look into investment JV's like this, thats what you want, an open book honest guy who says "hey, you will make money and so do I, I make this much here doing XYZ".
People who hide things have things to hide, and I have yet to have something good and wonderful hidden from me.