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Posted almost 4 years ago

Active vs Passive Real Estate Investing

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While that is a great way to invest in real estate there is another way though - passively investing.

Here's a brief breakdown comparing the pros and cons of active and passive investing:

Active Investing

Pros:

  • Potentially higher returns: Depending on how you structure the deal your ROI will likely be higher than typical passive real estate opportunities
  • Control: You have greater management control
  • Leverage: You can use other people's money (OPM) to limit your personal cash exposure

Cons:

  • Time: You are responsible for operations and management
  • Risk: As the managing owner you likely have higher liability risk
  • Talent: Investing and running a business requires certain skills that have to be constantly improved

Passive Investing

Pros:

  • Time: You are not responsible for day to day management
  • Risk: Your risk is typically limited to the amount you invested
  • Talent: You can invest with more experienced and skilled active investors

Cons:

  • Control: You have limited to no control in management decisions
  • Leverage: For the most part you are limited to your personal liquidity
  • Lower returns: Your overall returns will likely be lower than active investors

Which option makes the most sense for you and your investment goals?

Originally Posted on InvestedX.



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