Since I work with tens of thousands of investors from across the country and even some from outside the United States, I often discover that some newer investors believe that real estate is a passive investment.
They incorrectly think that once they buy some rental property and have a property manager in place that their work is done.
Unfortunately, real estate investing is not a completely passive investment, but there are ways to make it very, very close to passive and there is even a way to invest in the industry that is completely passive.
Let's take a look first at how to make real estate investing as passive as possible.
First, work with a team.
There is a great deal of time and effort that goes into finding, negotiating, structuring and financing new property purchases.
In addition, there is also time that needs to be put into finding quality tenants, tenant buyers or buyers for your properties as well.
The good news is that it does not have to be you that puts all the time and energy into this, but you do need to manage your team or, at a minimum, manage the management you hire to run your team.
You can bring in an acquisition team, a finance team and a property management team.
You can even hire an administrative team and executive manager to run your business, but you still need to manage them to make sure they are running the business according to what you want.
I also mentioned another way to invest that is as passive as you can get investing in real estate: becoming a private lender (also known as investing in trust deeds).
With this type of investment you are finding a professional real estate investor and you are loaning money to them to purchase property for their business.
With this model you usually get a nice, high fixed rate of return secured by real property with a healthy cushion of equity and all the management of running the business is the responsibility of the professional, not you.
So, while real estate can be an extremely attractive business with amazing returns, it is truly an active investment unless you are becoming a private lender.