Benefits to Passively Investing in Real Estate
Real Estate (RE) has always been known as a strong investment choice and in recent years, many more people have carved their path to success in this industry. That said, many folks who would like to invest in real estate have valid reasons for not doing so due the time and effort required to actively source, fund, and manage real estate deals. Passively investing addresses many of these issues and today’s article will look at a few of the reasons passively investing might be for you.
1. Less Time and Effort
The first and most common reason people do not invest in real estate is because of the time and effort required. While the mainstream RE investing culture almost insinuates that real estate investing is easy, the truth is that while simple it often takes a tremendous amount of time and effort. For many individuals with jobs, family and other life interests there simply is not enough time to add RE investing to their plate. Passively investing is a great alterative for those who do not want to dedicate their nights and weeks to dealing with the various headaches that come with actively investing.
2. Less Risk
Flying on a plane through high turbulence can be a stressful experience for many people. The feeling of no control of the situation and lack of understanding about how a plane is designed for these situations can certainly worsen this feeling. From a logical perspective however, it doesn’t take much persuasion to convince someone that the plane is best positioned in the hands of the pilot who is experienced in maneuvering the plane through this environment. The same is true in RE investing. Many new investors lose money due to lack of experience when it comes to analyzing deals or executing the business plan. Having money in the hands of an experienced investor is much safer for such individual.
3. Less Liability
When dealing with tenants and investors there are many laws that must be followed. Failure to abide by these laws even out of ignorance can result in severe consequences that many people do not want to worry about. Passively investing removes almost all the liability from RE investing. The legal position of an LP removes them from the decision-making process of the investing where these mistakes can be made and from the liability that comes with signing on a high value loan. Additionally, having the property under an LLC limits liability to the money placed in that given investment instead of all the assets owned by the LP.
There are many important considerations when evaluating a multifamily deal and we make it our mission to careful vet each of these items. If you would like to learn more about passively investing in multifamily, please check out our free ebook "Achieving Financial Freedom Through Multifamily Investing."