Do you know the difference between active and passive real estate investing and, more importantly, which might fit the bill for you and your current situation? Learn more about these two different real estate investment strategies and which will work best for you.
Active Versus Passive Real Estate Investing – What’s the Difference?
Many inexperienced real investors will consider real estate investing as a largely passive income stream. However, once they start researching, they soon find that it’s not as hands-off as they first thought. Still, that doesn’t mean a passive income isn’t out of reach; you just need to know which strategy will get you there.
Active real estate investing is what most people will have in mind when considering purchasing an investment property, but active investing can take a few different forms, including:
- Renovations and developments
Regardless of how you enter active real estate investing, you will be heavily involved in various parts of the process. Whether you are a hands-on DIY investor or plan to use a team of professionals, the amount of time and energy required to successfully enter active real estate investing can be equal to a full-time job or more. It can also require significant capital and a certain degree of risk.
Passive Real Estate Investing
Passive real estate investing is all about working with an active investor and purchasing the right investment at the best price and receiving the returns month after month, with your role primarily being a hands-off one.
The Active investor is busy doing the following:
- Researching the market.
- Marketing and finding the right deals.
- Doing due-diligence on the properties.
- Negotiating and closing the deal.
- Arranging financing
- Managing the team.
- Taking care of renovations and improvements.
- Property management
- Tenant management.
- Keep up to speed with continuing training and education.
- Investor reporting and relations.
- Coordinating final exit plans for the property.
The Passive investor’s involvement is usually limited to:
- Provide capital (money)
- Qualify for financing (if needed)
- Share in the profits (watch their payments come in).
Which Real Estate Investment Strategy is Right for You?
It really depends on how busy you want to be.
If you have the time, energy and experience to be an active investor, it can be very lucrative.
On the other hand, if you are looking for a hands-free type of investment that is secure and offers a variety of different ways to profit – then being a passive investor may be a better fit.
About Kendal Slipchuk
KendalSlipchuk.com is a real estate investor. We have been actively involved in Calgary area with our real estate investing. Our mission is to provide quality housing for quality tenants, while at the same time providing an above-average return on investment (R.O.I) for our investor partners and ourselves. It is truly a win-win-win way of investing!
Kendal offers his investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Kendal.