Passive Investing

Defined

Passive real estate investing is when you invest capital as a limited partner. Investors contribute funds and remain uninvolved in the day-to-day responsibilities such as acquisition, upkeep, or sale of properties, relying instead on experienced sponsors and operators who act as the general partner.

Benefits

Numerous healthcare professionals often report that their busy schedules leave little room for engaging in real estate ventures. Thankfully, this option is designed to reduce the time they need to commit. It enables them to tap into the knowledge of experienced pros while still accessing the substantial benefits for high-income individuals.

Education

I advise against passive real estate investment based solely on your rapport with the general partner. Understanding multi-family properties isn’t overly complex, and your investments should be based strictly on the deal’s strengths. I offer a rapid education in the essentials, equipping you to make informed choices and providing consultative support when necessary. Whether you passively or actively invest, getting a baseline of training is essential.

General Partner vs Limited Partner

General Partner

A General Partner is an owner of a partnership who has unlimited liability and is typically responsible for managing the daily operations of the business.

Based on my experience, I recommend applying the 80-20 rule when selecting a general partner—only one in five has the expertise and integrity needed to manage your investment wisely. Be cautious of the many self-proclaimed real estate experts emerging today. To put it in perspective, it took me a full decade of industry experience to feel confident enough to invite others to invest with me.

Limited Partner

A Limited Partner is an investor in a partnership who provides capital but does not have a hand in the day-to-day management and whose liability is restricted to the amount of their investment. Being a limited partner is the only way to be truly passive.

Frequently Asked Questions

Common Questions, Simplified Answers

What is the best way to start investing in multifamily real estate?

Beginning your investment journey in multifamily real estate starts with education. Familiarize yourself with the market, understand financing options, and consider partnering with experienced investors or advisors. It’s also prudent to start with a clear investment goal and a solid financial plan.

How can I assess the profitability of a property?

Is it better to invest in residential or commercial real estate?

What are the tax benefits of real estate investing?

How does leverage work in real estate investing?

Can real estate investments protect against inflation?