Their level of knowledge and expertise can usually help to limit potential downside risk.The last down cycle I think owners went to high on LTV ratios, prices paid, and starting large development projects that take 3 to 5 years at the top part of the cycle.

If you have a knack at creating systems, hiring, and putting good people in place to operate  or manage an active investing operation then you might be better suited for passive investing.The downside with passive is that you make a lot less returns and have little to no control over the asset.

You are paying full market value.If you ARE having to put in money up front, that you may loose, AND taking the risk of buying a property that has questionable appraisals that you will be stuck with, then i sure hope there is enough upside and some good enough returns to make up for the risk.As for me, i am more comfortable having dozens (hopefully someday) of base hits with the cookie cutter provider than try to take the risk finding the grand slam with a property that i have to put an extra $25k into because the bank doesn't think its worth it.Then again, if you are comfortable with the downside and you are confident that it will give you the returns you seek, then go for it.

The downsides are not having the ability to upsell or having a storefront in place for complimentary products and offerings, UHaul rentals, EBay sales, etc. is something that having an onsite presence in place can offer.Just my $.02

One clear downside to the short-term option is likely difficulty filling the unit in the off season.

IMO, the downsides are that you are not actively learning/closing a deal yourself and you have to be VERY CAREFUL that you partner with a syndicator that you trust and believe in...your reputation is everything.

Your ultimate bottom line to the downside is, could I rent this for my fixed costs if I had to?  

@Steven Mitchell I wouldn't say that is "standard", although many PM's want to protect their downside built in.

On the down side, however, he also doesn’t really feel the increase in equity of $5,300, because despite the lower mortgage balance, the mortgage payment does not change.

Winterize property Sales Price $145,500 Purchase Price $(101,866) Closing Costs $(12,444) Rehab Costs $(15,440) Net Profit $15,750 PAY ATTENTION IF YOU ARE USING HARD MONEY LENDERS – I used cash to buy this property hence my downside and losses were limited.