Passive Investing 101 - Courtside Cashflow

Passive INvesting 101

WHAT IS PASSIVE INVESTING

Simply put, passive investing means you leverage your own money to invest in a company or business which in turn pays you a portion of their profits as passive income. As a passive investor you will not play an active role in the management of that company . This does not mean that you will not be doing any work though. In fact, you should be doing a good amount of work up front to understand the investment. You also need to ensure that your investment is the right tool for you.

You will also want to make sure you choose the right team to manage your investment as you will likely be investing a significant amount of money. Since you are investing large amounts of money there is an expectation of a return on the money you contribute when becoming a passive investor. Those returns are usually paid out monthly, quarterly, or annually.

CHOOSING YOUR REAL ESTATE INVESTMENT

Choosing the right investment is important but I would argue the right team is even more important. You will be working with this team for a period of years so choose someone trustworthy and experienced. Once you have selected your team, then look closer at the investment tool they are using and ensure it makes sense for your investment strategy.

When it comes to real estate investing there are really three avenues you can choose to passively invest.

1. REITs – Investing your money through the stock market into any number of REITs

2. Real Estate Crowdfunding – Investing through crowdfunding sites or projects usually via an app on your phone or a website

3. Private Placements – Investing through small private investor groups. They are proficient at buying and selling properties and making great returns.

ALTERNATE INVESTMENT OPTIONS

An alternate way to invest in real estate or other tools is to invest in a fund. There are many different types of funds which you can invest but for my story, I'll focus on funds which seek out real estate assets or cryptocurrencies.

Funds are traditionally structured very similar to private placements but in a fund you will have a fund manager whose job it is to find the assets which you will be investing. For real estate funds there are many business plans which are commonly used:

Short Term Rentals - Investment is focused on buying, renovating, and selling homes in desirable locations leveraging VRBO, AirBnb, or other short term rental applications to turn a profit which is then returned to the limited partners who put their money into the investment.

Multifamily - Investment is focused on buying, renovating, and selling apartment complexes in up and coming location around the country. These investments also pay the limited partners for the use of their money to turn the complexes around or fix them up.

Build to rent communities - Investment is focused on buying land to build a community of rental homes, similar to condos but with individual homes and some sort of amenities. Again the profits are dispersed to the limited partners at regular intervals( monthly, quarterly, or annually)

Cryptocurrencies - Investment is focused on ways to invest in cryptocurrencies in a multitide of ways which in turn provides a profit for their investors which is paid back to them as a limited partner.

These are just a few of the different funds that you could explore, there are many more and its really up to the imagination of the investor to find what they are really passionate about. All of these options allow you to start having your money work for you instead of sitting in the bank and losing out due to inflation. The trade off is that your money will be locked up for the duration of the investment and not everyone can afford that trade off.

If you are interested in learning more about this please reach out to me so I can help educate you on the process and help get you started on your investing journey.