How passive IS passive investing?

Question

For those that buy and hold for the income, how much time do you devote to your business?  I understand that starting out, depending on how fast you want to build your portfolio, you could spend a lot of time at it.

For those with established portfolios, how much time is required to maintain it?  Is this your full time 40 hour per week job?  How free are you to do other things in your life?

Thanks!

Todd Dexheimer · Answer

I currently own and manage over 60 1-4 units and spend between 3-8 hours each week on them. Systems are in place and the team is in place. A few weeks ago my maintenance guy retired, which added a few extra hours for some time, while we searched for a replacement. I also own large multi-family that I hire 3rd party managers for, which take up some more of my time.

Honestly, I think that I could add 60 more 1-4 units and not add much to my work load. The most time consuming part is finding and closing the deal and then renovating it.

Neil Henderson · Answer

Great question @Brett G. and I think a really important one to start with when first looking at real estate investing.

What do I want my life to look like once my real estate investing business is up and running?

The life of a successful house flipper is very different from a successful note investor.

The life of a successful buy and hold investor in single family homes is different from a successful commercial real estate syndicator specializes in large multifamily.

Every one of the above strategies has the potential to provide you an amazing life and build enormous wealth. However, they are very different and I think it's really important to begin with the end in mind.

Most people here are looking to generate passive income. I prefer to call it risidual income. It takes work to generate that risidual/income, but it keeps paying you long after you put in most of the work. Notice I said MOST of the work. Most of these strategies still require some work to keep them functioning correctly. How passive they are depends on a lot of factors; buying right, doing business with reliable people (good tenants, property managers, contractors, etc.), building and perfecting systems that work with minimal input from you.

I've seen buy and hold landlords struggle to maintain two properties "passively". I've seen landlords manage an enormous portfolio of single family homes very passively. I'm in awe of people like @J. Martin who have built portfolios of short term rentals (NOT the most passive investment strategy) that continue to function and put off cash flow even when he's vacation down in Columbia for over a month. In his case, it's about systems, systems, systems.

Eric Adobo · Answer

If your name is on title it's not really passive. Even if you don't lift a finger.

A stock REIT is passive.

Curt Davis · Answer

I am a full time investor and I have 27 sf homes in my portfolio. I have a management company for all of them except 3.

My management company contacts me if they need anything from me. I dont really bother them too much. The 3 that I take care of, 1 of them is a family member so that is easy with no issues. The other is an owner finance which is easy to deal with and the last one, they pay late 50% of the time.

Since I have been doing this for some time ( 11yrs ) I try to stay out of the way and let the ppl I hired do their job while still monitoring at times ( mostly income/expenses ).

I try to spend as little time on this as possible. Maybe less then an hour a week ( checking the management portal for any messages or repairs to approve ).

Theo Hicks · Answer

The investment with the lowest time investment is passively investing in larger syndicated deals. For example, an apartment syndicator notifies you of a new opportunity, you attend a conference call/webinar to learn about the deal, and, if you decide to invest, you sign a few documents. From there, you receive a return every month/quarter without any further effort.

If you are buying your own deals, the most passive approach is to hire a property management company. Then, schedule weekly or monthly performance reviews to make sure they are executing the plan effectively.

Ivan Barratt · Answer

I think @Neil Henderson has a great response. I'm a 24/7/365 "active" investor and I own a vertically integrated company of 70+ employees who manage our portfolio and others' as well.  I started with a handful of management deals in my spare bedroom and grew by sheer will and persistence. Now it's more fun but it took a while to get there.

At this point in the cycle it's very easy for new, wannabe active investors to get burned!  Most people are likely better off investing with professionals whether it's real estate, private equity, etc however there's a lot of education in how to underwrite a sponsor of deal.

Timothy W. · Answer

Buying and holding does not require investors to spend tonnes of time on the property at least in my experience. I've only had to visit the property if there were any repairs or maintenance to be done. So I am not able to put down the exact number of hours that people spend on this.

Cheers,

Tim

Alina Trigub · Answer

@Brett G. Handling portfolio of rentals (just like most of other residential/commercial investments) is a business. So I couldn't agree more with @Neil Henderson. It's all about automating your business. Obviously this takes awhile but once you put the systems in place, you should be relatively free to do other things or continue growing your business.

Scott Morongell · Answer

@Brett G. thanks for clarifying, I am not in this space personally but I do know some who are.  Systems are a big factor when it comes to how much time is till spent once all is said and done.  If you do not have systems in place and have manually go around and collect rent the head to the bank to deposit etc the hours can add up quick.  If you have good systems in place it does not require a ton of time, maybe 5 hours a months.

Brett G. · Answer

@Scott Morongell  My question is for those folks that buy and hold sfh and small multi’s.  And may or may not use property management.

The process to buy, rehab, rent requires some time and effort.  But, after all the work is done and a renter is in place, how much time does that take of your day/week?

Thank you.

How passive IS passive investing?

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