Passive Real Estate Investing

[Jonathan S.]

Hi Everyone,

I am looking to develop passive real estate investment opportunities, but I am not sure if I completely understand what investors look for when investing in certain passive real estate investments, or real estate in general. Before finalizing anything, I wanted to get a better understanding of how to evaluate different real estate opportunities and what challenges might be posed. 

I would appreciate any comments on any of these questions:

1. What is the most important factors when considering passive (or even non-passive) real estate opportunities?

2. How do you determine a reasonable target return?

3. What are the challenges of passive investing as opposed to traditional real estate investing? 

I want to ensure that the structure of these investments I am working on correctly address key issues for investors. If anyone has any questions or is open to discussing further, please feel free to let me know!

Thank you!

[Jaron Walling]

@Jonathan S. REI is pretty unique and comes in many flavors. Instead of asking questions about passive or active you need to ask yourself what sacrifices can I make to get started. If were talking about a group of investors they need to bring value to the table. 

There is no passive REI. Lets make that clear. From SFH BRRRR, flip, or complex syndication apartment deal they all require effort. At a minimum they require babysitting (response to a PM company), research, and educated decision making (accredited investor status). Few people get into REI and find out it's totally hands off. If you want hands off get into the stock market and buy bonds, and S&P 500 index funds.

The challenge for passive investing is you have little control. If the stock market goes on a roller coaster ride you have no control. With REI we have ALL the control. I created my lease from scratch and dictate what happens in our properties. I control rent (income) and manage maintenance (expenses). A small amount of effort yields a good long term ROI.

Targeting returns with REI is based on market analysis. You run the numbers on targeted properties in specific neighborhoods, repeat a bunch of times, and something finally sticks. Every house can be a deal if the numbers make sense. Every strategy targets a different ROI and each come with varying levels of effort and risk. You have to value your time, leverage your skills, and execute a long or short term play.