How to make big money by passive investing ?

[David Smith]

Or just similar return as saving in banks?

[Chris Grenzig]

@David Smith I think what everyone has failed to acknowledge is what is big money to you?

You reference after the post "or just similar return as saving in banks" and that confuses me because I don't think anyone would consider that big money.

Also, you say big money not big return % which is probably just a typo, but you can make $1 mil a year if you made 1% by investing $100 mil as an example.

The answer I think you're looking for is what are returns as compared to a savings account and thats very easy to answer, they are vastly different, but passive investing will also give you vastly different returns depending on the asset you invest in.

Most people that are quoting 15-20% returns are talking about annualized returns or IRRs which is not payouts per year like dividends or cash flow, deals like that tend to pay dividends quarterly of around 6-8% and the rest of the 15-20% per year is accrued until sale.

However, most of those assets would also C/B assets (B is even debatable) and are often using moderate/high leverage in debt from a bank which makes it significantly more risky than putting your money in a savings account. Now most people feel that the risk is worth the return considering a bank is paying <1% probably or around there, but don't be fooled it's significantly more risk.

A savings account is little to no risk in losing your investment and basically certain that you won't lose more than you put into that account.

When you invest passively, you can very realistically lose all your money, and there is a possibility you could have to invest more if the property needs a capital call.

Therefore, you need to understand what the risk is on every deal, and weigh it against the upside and decide if thats worth it for you. However for high level return expectations I think you can expect the following

Multifamily only, moderate leverage (75% LTV), in fairly populous cities (top 50 or so in the US).

C class: 14-16% IRR, 6-9% Cash flow

B class: 12-14% IRR, 5-7% cash flow

A class: 10-12% IRR, 4-6% cash flow