Active vs Passive Real Estate Investing

Active vs Passive Real Estate Investing

Are you interested in real estate investing but don’t know where to start? Read on about the differences between active vs passive real estate investing and how you can take action to learn more.

Active Real Estate Investing: Get Your Hands Dirty

When people think about investing in real estate, they might think of the various HGTV shows out today. Viewers can get a healthy binge of fixing and flipping programs, from the coastlines of California to the suburbs of Georgia. These shows are tremendously popular, but might lead viewers to an idea that it’s simply a matter of finding a fixer, doing some renovations, making the sale, and then receiving a profit. But if it was only as easy as they make it seem. These shows have entertainment value. But what viewers don’t see are the countless hours the hosts spent learning about real estate and the mistakes they made over the course of their careers.

Fix and Flip Opportunities

Many real estate investors who make a career out of fixing and flipping and can tell you horror stories. Some have lost everything at one point. Unexpected issues such as misunderstood zoning laws, hidden and unforeseen damages, or a bad contractor, can destroy what in the beginning looked like a great deal. That’s because there is a high degree of complexity to find, fix and flip properties. In order to be truly profitable, you have to start with a great deal. Investors need to understand the After Repair Value (ARV) of the property and what it will cost to renovate, market, and sell. Crunch the numbers and plan for contingencies. Flips are only profitable when the numbers make sense. active vs passive real estate investing They key to a profitable fix and flip starts with a great deal.

Tenants and Toilets

To buy and hold property and rent it out, has its own set of problems. A tenant can fall on hard times, miss rent payments, and leave the owner on the hook for the mortgage payment and repairs. One landlord I know had a model tenant for years. But when that tenant went through a nasty divorce, he caused thousands of dollars in damage to the property, punching holes in the drywall throughout the house. Another property owner evicted a tenant only to have all the appliances stolen out of her rental. There is story after story you might hear about bad renters. It can cost property owners thousands of dollars in evicting a tenant and repairing the property. These are all costs absorbed by the property owner.

Hands on Management

All horror stories aside, traditional hands on real estate investing, whether it’s flipping a property or holding a property for rental income, is still amazingly profitable for many investors. The point being its “hands on”.  As an investor you are actively involved in the process of managing the buying, fixing, renting or selling processes. For successful real estate investors this can be a full time job.  And is just one side of the active vs passive real estate investing discussion.

Passive Real Estate Investing

What’s not to love about the idea of passive investing? Basically you invest your money, without the need for a lot of management. Now there’s a lot of different passive real estate investment opportunities. Many that even seasoned investors might be unaware of, including:
  • Notes or Trust Deeds
  • Brokering—lending money to other investors
  • Real estate investment funds (REIT)
  • Reg A+ funds (like the Circle of Wealth Fund III LLC)
  • Buying raw land and holding it for future sale
  • Rental property (passive when you hire a company to manage the property)
Even with a passive investing model, you can’t just put your feet up. An investor needs to learn and understand what these real estate investment niches entail. Each of these different facets of real estate investing are diverse and have their own complexity. But once you get over the learning curve and work with people you can trust, you can achieve a tremendous amount of freedom and the ability to put your money to work. learn about active vs passive real estate investing opportunities If only it was as easy.  The truth—you’ve got to learn before you can earn.

Education is Essential

Did you know you can purchase a note on a property, hold that note and draw interest off of it for a specific period of time? No? Now’s a great time to learn. One great resource to begin your learning journey is YouTube. There are numerous videos on these topics that will allow you to dip your toes in the water to understand available options. But a word of caution… Never take information from others at face value. Always vet the information you receive to make sure you are getting the “whole story”.
Always Trust But Verify
The real estate investment niche is full of people that would love to take your money. Like any investment, real estate is subject to risk. So before jumping into the ring with passive real estate investing, make a commitment to learning.

Who Can You Trust?

One of the quickest paths to getting up to speed on passive real estate investing is finding someone you can trust. Look for a well established company or individual that has extensive experience in the industry. There are many companies out there that provide training and mentorship for you to understand passive real estate investing. Many of these even have vehicles to allow you to take advantage of returns on real estate. Usually experienced managers run these investments, such as is the case with Secured Investment Corp.’s, Circle of Wealth Fund III.

Find Your Opportunities for Financial Growth

Whether it is either active vs passive real estate investing that interests you, you’ll first need to understand what are “your” dreams for the future. How much are you willing (or not willing) to take on? These aren’t questions others can answer—only you. But through education and sound mentorship, investors can open up a world of possibilities to make those dreams come true. You can learn more about real estate investing by attending one of our FREE webinars. The Lee Arnold System of Real Estate offers classes and mentorship on many of the passive investing models mentioned above. To attend a webinar, click the button below or call 1-800-341-9918.

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