Passive Real Estate Investing: What's best?

Question

I would like to know where investors go (or have been referred) to passively invest in Real Estate, and what kind of experiences you've had?

Marco Santarelli · Answer

@Matthew McGoldrick — Welcome to BiggerPockets!

That all depends on how you’re defining “passive” Investing.  It also depends on what you’re looking for in a passive investment.

I’ve covered the topic in great detail on my podcast, with much of the foundational content in episodes 1 through 10.

You need to consider how connected to the investment you want to be. Do you want to work with partners or investment managers? Do you want direct ownership, or do you want to own equity interest in an entity that owns the assets?

What are you thinking of in terms of investments?

Continued success!

Seth Ferguson · Answer

Hi @Matthew McGoldrick,

There are quite a number of people on here that are LPs, and a good number of well-respected GPs. Feel free to message me for some connections.

John Fortes · Answer

Hello @Matthew McGoldrick!

Depending on how you characterize it, you can do so via these popular tactics listed below.

• Crowdfunding site (accredited and non-accredited) 
• Syndication as a LP
• Lending as hard money to fix and flippers for percentage and/or points on top of the deal for lending
• JV partnership where your partner(s) manage the opportunity but you have a say in management but choose to be hands off.

I'm sure I'm missing one or two more options but these are the most popular versions of passive investing. All depends on what you are looking to do and how you want to go about it. Please feel free to reach out if you want to dive in more.

Alina Trigub · Answer

@Matthew McGoldrick As others already mentioned, a lot depends how you define "passive investment".

Additional factors to consider:

1) how much time you want to spend on it

2) whether you're an accredited investor

3) what are the tax consequences of a passive investment and how they impact your personal case

4) pro's and con's of each

5) the duration

Ian Ippolito · Answer

@Matthew McGoldrick , I've invested in real estate passively in my own portfolio since about 2006. Today there are literally hundreds of real estate crowdfunding platforms where people can do that. Then there are probably hundreds of thousands, if not more, of syndications (which may or may not be listed on the platforms) which provide access to the same asset class. My experience with my current portfolio is very positive, but not every investor has the same story.  I think doing proper due diligence is the key, along with an investor educating themselves (which takes time) and also taking a hard look at themselves to making sure they understand their own risk tolerance, how much they are willing to put into real estate versus other options, and then how they best want to divvy up that allocation among the many RE strategies, asset types, capital stack variations, etc. If you'd like to know more about what's in my own portfolio, please private message me.

Tom Ott · Answer

Probably the most passive investments are going to be Turnkey Investments or Equity Funds. Both of them are VERY hands off. Turnkeys are offered by providers who own the property, renovate it, place a tenant, and then manage it after purchase. Everything is done in house by one company. Ideally, you should be cash flowing on day one with a Turnkey. They are for long term buy and holds.

Equity Funds, on the other hand, are much shorter, typically 4-6 years. They are larger investments and have a large payout, but you are not the sole owner and you get chased out.

Theo Hicks · Answer

I find that there are two types of passive investing.

• Invest with another company (apartment syndicator, crowfunding, etc.)
• Buy your own properties and place them under 3rd party management.

No strategy is completely passive. But of the two strategies above, #1 is more passive than #2, because once you find one company to invest with, you just need to analyze their deals and decide which ones to invest in. But once you invest, the ongoing time commitment is very low.

For strategy #2, you will need to continuously find new deals, but that process can be automated. Plus there is more upside. Once you buy the deal, as long as you place the property under a trusted management company, the ongoing time commitment is also very low.

Personally, I am using strategy #2 to build up a large nest egg, and then I will strategy #1 and live off the cash flow.

Passive Real Estate Investing: What's best?

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