Is Passive Real Estate Investing Right for you?
Ask yourself some of these questions to to see whether passive real estate investing is right for you in your path to financial freedom.
Are you busy with your family and have little time to devote to the process of purchasing real estate investments?
Do you want the expertise of someone else to choose profitable properties and great markets and a team to manage renovations to add value to these properties?
Do you want to reduce your risk and share your returns, owning a piece of an apartment building?
Do you want to diversify into markets other than where you live?
Do you want to invest in real estate, without having to do the work of finding or managing the property yourself?
If you answered YES, then passive investing could be right for you.
On the other hand, active investors take a hands-on approach. You have the time to purchase and manage properties for rental income, or renovate and flip them for gains. You are involved in every part of the deal, finding the property, researching the market, running the numbers, do the inspections, obtaining financing, finding the tenant and managing the property. You have more control but accept greater risk in return for the possibility of bigger returns.
Some people have both types of investments or focus primarily on passive or active. It all depends on where you are on your path to building wealth and how it fits best into your investing goals. The great thing about real estate is that there are so many opportunities to invest in all ranges and goals.
How does Multi-Family Syndication fit into this?
Syndication is simply a group investment, where investors (called Limited Partners) pool their money together, to purchase a larger real estate asset such as multi-family apartment buildings. The group investment is a passive investment, letting others perform active management on their behalf.
In other words, instead of purchasing a property on your own, financing it, paying the down payment, and actively managing the property, you pool your money together with a group of investors to purchase a multi-family apartment building. Real estate syndications allow you to invest in real estate, without having to do the work of finding or managing the property yourself.
The team that does the active management of the property (called General Partners) takes care of the financial and market forecasting, accounting, maintenance, day-to-day property management, sales process. In return for this, they get a share of the profits.
During the investment, you will receive cashflow distribution checks, usually monthly or quarterly. At the end of the investment, you will get your initial investment back plus a share of the profits from the sale of the apartment building.
As a passive investor, you enjoy not having to do any of the “heavy lifting” and realize the gains of cashflow, profit-sharing, and tax benefits.
This could be a path you can take to diversify your investments and build passive income without the responsibility of being an active real estate investor.