Passive Real Estate Investing
Often, when people think of real estate investing, they imagine buying properties and renting them out to tenants for long-term income. While this is a valid method of investing in real estate, it is not the only option. There are several passive real estate investment options that do not require as much time or expertise, such as investing in a real estate syndication or buying whole properties and hiring property management companies to take care of day to day operations.
The first type of passive real estate investment involves investing in a private equity real estate (REIT) or real estate fund. These professionally-managed funds pool investor capital and invest it into a diversified portfolio of commercial real estate assets. Investors receive distributions of cash and can be taxed as ordinary investors. These investments are typically more liquid than direct ownership of individual properties and have lower minimum investment amounts.
Another way to invest passively in real estate is through crowdfunding platforms. These online platforms allow real estate developers or deal sponsors to raise capital from individuals in exchange for a financial interest in the project. Crowdfunding is a relatively new form of passive real estate investing and requires careful research to identify credible platforms and project sponsors.
Passive Real Estate Investing in Self-Storage One of the most popular forms of passive real estate investing is self-storage. These facilities are in high demand and offer stable, predictable cash flows. Many self-storage investors choose to partner with experienced general partners to manage their properties. These general partners have the relationships, expertise, and resources to find, purchase, and manage institutional quality commercial real estate assets on behalf of their investors. In return, they provide their investors with fractional ownership of the asset and periodic distributions of cash.
Real estate syndication is an investment strategy that allows a group of investors to purchase an entire commercial property or a share in an existing property. These investors are known as “limited partners.” Their role is to provide the necessary capital for the purchase and ongoing operation of the property. They may also participate in the decision-making process, but they do not manage the day to day operation of the property or make financial decisions on behalf of the syndicate.
Active Real Estate Investing
Active real estate investing involves analyzing the cash flows of a commercial property and making day-to-day management decisions designed to maximize investment returns. This can be a full-time job that requires substantial skills and experience in real estate, finance, and accounting. Managing an active CRE investment requires an immense amount of time, from researching potential markets and property types to evaluating financing options, negotiating deals, assembling a team of trusted professionals, and overseeing construction projects to ensure that costs stay on track and deadlines are met.
Investors can be as passive or active as they want when it comes to real estate investing, but it is important for them to have a firm understanding of what they are getting into and the level of commitment and involvement required by their specific investment strategy. Passive income real estate investing is an excellent option for many investors, but it should be carefully evaluated to ensure that it fits with their investment goals and lifestyle.