Wait.. I thought this was a "passive" investment?

Updated: Dec 10, 2019

Real estate offers a myriad of ways to invest, but they are often overlooked in favor of the most easily understood and most common methods. Many investors I speak to know someone who is flipping houses or someone who owns a rental property. Real estate can generally be considered a great investment over a long enough timeline, but before you buy that run-down house across the street, please seriously consider how involved you want to be and can afford to be.

Many people come to real estate because they want more control than they can find in the stock market. With all of the cheap online brokerage platforms today it is so easy to just "click-and-hope", only to find half of your investment gone within the week because the value of bonds in Greece plummeted. Who can truly predict these things? However, when you desire more control over your investment, you have to be willing to trade more time in exchange.

Flipping houses and managing rental properties is hard work and there's nothing passive about it. Please read and repeat that statement to yourself so as not to forget it. We all have different life situations that we need to reflect on before jumping into this business. Clearly understand that, in this industry, opportunities abound for you to sink time and money into semi-good or terrible investments. Maybe you work long hours for an employer or have a spouse and children. Maybe you have no desire to buy a radial-arm saw or to teach yourself how to miter trim work. Then again, maybe you want to pick up some new skills and work with your hands. Things can be simpler and more profitable when you work for yourself and reduce your reliance on contractors. If you want ultimate control and have tons of spare time, then by all means, jump in and make sure to enjoy it! Just don't go in half-cocked without a plan or without the commitment necessary to see it through to the end.

The trick is finding those investment opportunities that best balance control, time, and risk. There are ways to make good returns in this business without committing tremendous amounts of time. This is the passive way to invest in real estate, and there are a wide-range of involvement levels. I outlined some of the most well-known methods in the illustration below. We will visit these methods in more detail in coming posts.

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