W2 professionals - passive investor or DIY?

[Annie R.]

Most of the discussion on this forum seems to cater to the DIYers. I haven't seen much discussion on routes for passive investors to make similar or comparable CoC, cash flow, and equity as regular active investors. Is there a sub forum for those of us who have good W2 jobs that supply the investment capital, who want to be passive investors? Do returns on those types of arrangements typically beat the stock market? Looking to understand if the DIY model (regardless of niche and investment strategy) is where all the magic happens, and what the ballpark differential in returns is from the passive investor model. Thanks in advance for any insight!

[Scott Lundgren]

@Annie R. First off congratulations for taking the initiative to create more financial security for yourself. You asked if there is a Sub Forum for those who have good W2 jobs that supply the investment capital, and want to be passive. While syndications and REITS do fit this description those options reduce your control and ROI dramatically. Have you concidered working with a Turnkey Provider of Rental Properties? The turnkey model would allow you to be passive, but still have control of the entire investment. Most of the posts focus on ROI and how much more you can make if you are DIY, which is accurate. We find that when people do everything on their own they could make 10-20% more than working with a provider. But there is aspect that nobody had addressed in this chain, and that is risk. DIY requires you to find the right markets in the country, then find the best neighborhoods in that market, then the best properties in those neighborhoods. After that you need to find good quality contractors, leasing agents, and Property Management. All of these have their own issues that if not done correctly could end up costing the DIY'er vs letting someone else take that risk on. Even with additional margin that risk isn't always worth the reward. Look at a typical rental that costs 100-150k, after all expenses you should net 250-300 positive cash flow. Let's assume it's 250 for this example. If you can make 20% more by doing it yourself the spread is 50/mo, or 600/yr. If you have any sort of hurdles, or mistakes that cost you more than 600 then you are already behind on the ROI. Even if you do everything perfectly you just traded a lot of time for 600. If you are looking to reduce risk and time, then 10-20% is your cost to make that happen.