Passive investing can be one of the best ways to gain an additional source of revenue, reach retirement goals, and help roadmap an individual’s financial freedom. What makes passive investing enticing to many, is the “hands off” approach to growing your bank account and your net worth. In passive investments, typically the Board of Directors or Sponsors on the real estate transaction are responsible for ensuring that the day to day operations, financials, and asset management are all hitting the goals that were initially set. The passive investor is able to review the asset’s performance as reports are created by the sponsors and managing members.
A common type of investment that passive investors invest in are Syndications. A real estate syndication occurs when a group of investors pool their capital to jointly purchase a large real estate property. Examples of large real estate property could be self-storage facilities, multi-family housing, retail and office space, and land just to name a few.
Whether investing in a syndication or another type of real estate investment, it is important to understand the property you are investing in, trust the sponsors, and be aware of the terms of your capital contribution. Terms of your investment refer to the projected return on investment, when to expect distributions, what is the exit strategy, and several other items you may want to know ahead of agreeing to invest in a real estate transaction.
Regardless of what you invest in or how you choose to invest as a passive investor, it is important to always ask the right questions, review any due diligence material provided, and provide a level of commitment and involvement required to make that specific investment strategy successful.