We created a there--step framework for investors to be able to invest passively in any type of real estate. You an use this if you are either looking to invest passively, or, if you are raising capital, refer back to it, and focus on these three pillars:

The biggest mistake I see passive investors make is they focus on the deal, what's my return, when in reality, that is the last pillar they need to focus on. First, focus on the sponsor. Then, your alignment of interests with the sponsor. Finally, after both of these have been satisfied, let's start underwriting deals.

1. The Sponsor: Track record, their experience in the asset, their assembled team, any full cycle deals. The sponsor is the one driving the ship, the one making decisions, the one who has to communicate, the one who is the bearer of good and bad news!

2. Alignment of interests: HAs the sponsor properly conveyed the risk in investing in real estate? Have they told you it probably isn't a good idea to invest money you need to pay your rent and groceries? Have they spent time learning about your goals and objectives with investing? Does your time line line up with the deal you're investing in? Does the sponsor have skin in the game? (They better, in my opinion). Your interests need to align with the sponsor, and if not, take a hard pass.

3. The Deal: Now, let's look at the deal and how to Buy Right Manage Right & Finance Right®.

These are all heard lessons I learned on my first passive investment. I can blame the Sponsor all I want, and believe me, he was negligent, incompetent, among other things. BUT...., if I had applied my alignment, along with doing better due diligence, and learning how to underwrite, I may have never come up with this framework.

If you are raising capital, take the time to learn if your interests and deal align with the investor, and if they don't, tell them thank you but take a pass. You can always ask them if they know someone who would be interested.

What are you looking out for as a passive investor?

Gino Barbaro

Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly

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