Depending on your goals and how much work you want to take on will factor into your decision to become an active or passive investor.
This guide will break down the differences and help determine whether you want to be an active or passive real estate investor.
What is a passive investor?
If you aren't interested in running the day-to-day management of a property, becoming a passive real estate investor might be for you. A passive real estate investor allows you to own real estate without the hassle of managing the property. You can invest in real estate through a real estate investment trust (REIT), crowdfunding, or through real estate syndication as a limited partner (LP).
What is an active investor?
On the other hand, if you want to be on the management team, you can become an active real estate investor. Active investors run the day-to-day operations of the investment and have greater control of the business plan and outcome. Here are five steps to get started in apartment syndication.
What are the pros & cons?
Pros | Cons | |
Passive Investor | Tax benefits | No management control |
| No experience needed | Networth & Income Requirements |
No time commitments | Lower returns than active investor | |
Active Investor | Pros | Cons |
| Limited money in the deal | Raise capital |
| Manage the investment | Manage the investment |
| Incentives for hitting returns | Liability |
Conclusion
Passive investors can enjoy the benefits of real estate investing without dealing with the headaches of property management, but they may have less control over the investment.
Active investors can potentially earn higher returns by being more hands-on, but they also take on more risk and have to deal with property management responsibilities.
The choice between passive and active real estate investing depends on your goals, resources, and preferences.
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