Passive vs Active Investing

I hear people talk all the time about real estate and passive investing. In my experience there are two major kinds of investing in real estate and most real estate investing is anything but passive. Active investing is anything where you're involved, whether you're doing all the repairs and managing the property or even if you're doing next to nothing and have a property manager. Having a PM is still active, trust me. You need to talk to them and make decisions every so often to make sure things go well. Active investing will produce the highest returns when done correctly but is also quite a bit of work no matter how you do it.

True passive investing is investing with other operators or lending money. In both of these investments most of your work is done up front where you're making sure that the person and project that you are investing in is worth doing. Personally I put more stock in the person than anything else. A great operator will do all of the due diligence and be very concerned about both not losing your money but also their own. If they aren't investing a sizeable chunk of their own I'm not interested. Why I focus more on the person is for a few reasons, the first being that a good operator can make a bad deal go good. A true pro can deal with problems that pop up and take a bad situation and make it profitable! Second is that a true professional is typically very conservative and won't give you the best case scenario so they can outperform their model and give you a nice surprise! Similar to a doctor that usually tells you the worst case a great operator won't promise the moon.

There is a way for everyone to invest in real estate and there is also an ideal way for you. If you don't have a lot of money or know how you may be better off starting with househacking and building a rental portfolio off of smaller deals. If you make $300,000 a year and are able to grow you probably should focus on your career and invest with others. Figure out how your time is best spent and what will help you achieve your goals!