Active vs Passive Real Estate Investing

While that is a great way to invest in real estate there is another way though - passively investing.

Here's a brief breakdown comparing the pros and cons of active and passive investing:

Active Investing

Pros:

• Potentially higher returns: Depending on how you structure the deal your ROI will likely be higher than typical passive real estate opportunities
• Control: You have greater management control
• Leverage: You can use other people's money (OPM) to limit your personal cash exposure

Cons:

• Time: You are responsible for operations and management
• Risk: As the managing owner you likely have higher liability risk
• Talent: Investing and running a business requires certain skills that have to be constantly improved

Passive Investing

Pros:

• Time: You are not responsible for day to day management
• Risk: Your risk is typically limited to the amount you invested
• Talent: You can invest with more experienced and skilled active investors

Cons:

• Control: You have limited to no control in management decisions
• Leverage: For the most part you are limited to your personal liquidity
• Lower returns: Your overall returns will likely be lower than active investors

Which option makes the most sense for you and your investment goals?

Originally Posted on InvestedX.