When most people think of passive real estate investing, they imagine receiving a rent check each month that is much larger than the mortgage payment on their rental property. This would allow them to cover all of the costs of owning a property and pocket some profit in the process. This is possible to accomplish, but it takes time and effort to locate good rental properties and then manage them well. There are other ways to be a passive investor, such as hiring a third party to take care of the day-to-day tasks involved with renting out a property such as finding tenants and making repairs. This can save the investor some stress and money, but it also cuts into their potential profits because property management companies usually charge a percentage of the monthly rent.
Purchasing shares in a real estate investment trust (REIT) is another way to be a passive real estate investor. This is because the REIT will purchase and manage a portfolio of properties for investors who own the REIT shares. This type of investing can be done from any location, and it requires far less work than purchasing a property to be an active landlord.
Passive investments are a good addition to any investment portfolio, and they can provide a steady stream of cash flow without the high initial costs of purchasing or renovating a property. However, these types of investments are not for everyone, and they should be considered carefully when evaluating an investment portfolio. The right mix of investments will depend on an individual’s financial situation and risk tolerance, and it’s important to find a strategy that works for each person.
Another benefit of passive investing is that it can offer better liquidity than other real estate investments. Unlike residential and commercial properties, which are known as illiquid assets because they can be difficult to sell, a REIT is a liquid investment that can be traded on a public stock exchange. This makes it easier for investors to get out of an investment if they need to do so.
There are other ways to be a passive real estate investor, but each method has its own unique benefits and drawbacks. Active investments such as flipping houses can be a great source of income and can be quite profitable, but they require a lot of time and attention to make them successful. Other types of passive investments, such as rental properties and REITs, can be a good fit for many investors. Regardless of what investment strategy is chosen, it’s important to do your research and find a partner (Groundfloor) or platform that can help you find the best opportunities for passive investments. This will ensure that you can get the most out of your passive investments.