What is Passive Investing?
Passive investing is when you invest your money in a real estate deal that you don't have any direct responsibility in managing. You leave the day to day up to the general partner and property management company. This means you don't have to deal with unruly tenants, maintenance issues in the middle of the night and many other things that can happen
Benefits of Passive Investing
Passive investing in real estate is a great way to invest your money and make it work for you. Being a passive investor there are a number of ways you benefit.
1. Tax Benefits
Because of depreciation, your share of the income will be tax deferred. Meaning based on your ownership of the property/depreciation, that will help offset that amount of tax owed on your distributions of the property cash flow.
2. Won't have to deal with tenants, or day to day issues.
Since you aren't responsible for the day to day, you won't have to deal with the tenants at all hours of the night. Won't have to deal with plumbing issues or burst pipes. Won't have to deal collecting rents from tenants. All these things will be handled by the property management company.
3. You Can Let The Experts Manage The Asset
You don't need to know the in's and out's of managing a property. You can rely on the general partner and the property management company to handle the challenging part. By being the capital partner, you are hands off of all the potential drama that can come from improving a property and increasing the value. You get all the upside while doing minimal work to get there.
Risks of Passive Investing
As with any investment there is always risk associated with it. That's why you should do your own research on both the asset and the general partner presenting the deal. There are a few things that could go wrong with an asset. May not be able to increase the value as expected. May have some big items that need replaced like a roof or water heater or furnace.
How We Mitigate Risk
By being conservative in our underwriting we ensure we acquire the property at a good price point, account for the necessary repair funds and keep an operating reserve to avoid surprise breaks from being an issue. During the due diligence phase, we ensure there are no surprises going on entering into the deal.
Let's Chat!
If you made it this far, let's schedule a call so we can get to know each other!
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