What is a Passive Real Estate Real Estate Investing?
To fully understand what it means to be a passive real estate investor, let’s first explain the term passive. The term passive in relation to business is defined as ‘not actively participating’.
There are a few ways to become a passive real estate investor but specifically within multifamily real estate, a passive investor will provide a sum of money to their syndicator or deal sponsorship team. In turn, syndicators or ‘active investors‘ will work to manage the day-to-day activities of the multifamily investment property to ensure the property’s financial success. That’s the difference between passive and active real estate investors.
How Do You Receive Passive Income as a Passive Real Estate Investor?
In multifamily real estate, passive investors will typically receive quarterly, monthly, or yearly distributions from their sponsorship team.
The frequency and timing of distributions will all depend upon the syndicator and the business plan they put into place for the investment property.
When the asset is sold, passive investors will receive a return on their investment. This return can vary depending on how long the property has been held, the multifamily asset class, the properties appreciation whether forced or natural, and the current conditions of the market!
Passive real estate investing is ‘passive’ meaning it’s hands-off! This allows for many individuals to receive strong passive income and generate wealth through real estate without all of the work or stress.
Sound easy? That’s the point!
So, What’s the Catch to Passive Real Estate Investing?
As a passive investor, it’s incredibly important that you do your homework before investing. This homework should be related to what deal you should invest in, and more importantly who you invest with!
Here are some tips for identifying good markets for your investment.
It’s important for you as a passive investor to build trust with your sponsorship team. That way you can rest at night knowing your investment is in good hands.
Please reach out to us here for any questions about passive real estate investing in multifamily!