Is Passive Real Estate Investing Really Passive?

The term “passive” has achieved buzzword status when it comes to income and investing. Earn passive income! Passive investing is where it’s at!

As you may have surmised, what it means to do something passively varies mightily from one person to another. Some people refer to the income from their 8 personally-managed rental properties as “passive income.” Sorry, no.

Blogging doesn’t exactly provide passive income, either, nor do a host of other side hustles. So can real estate investing ever qualify as a passive activity?

Many people are understandably intimidated by the idea of managing multiple properties, finding tenants, and making repairs. They reason that if the goal is truly passive income, then real estate isn’t really an option.

Truly Passive Income

Crowdfunding and syndications, for example, require virtually no oversight–at least, once you’ve done your due diligence–and can produce excellent returns. Personally, I think both of these are great ways to dip your toe into the world of real estate investing.

Of course, even further to the right, you have REITs. Like stocks, REITs allow you to simply invest some money and then let it increase in value. The downside is that REITs are strongly correlated to the public market, and as a result, are subject to some volatility and may not provide true diversification.

The benefit of all of these is that they are truly passive. You don’t need to worry about the properties directly at all. No phone calls and no decisions to make.

So What’s the Catch?

If passive real estate investing is so amazing, why would anyone want to own rental properties? Well, when you own the asset, you have total control of what to do with the property.

So What’s the Catch?

Do you want to paint it? Do you want to increase the rent? Do you want to sell the property? Do you want to pass it to your kids? When you invest in passive real estate investments you give up control. Someone operates the deal and you’re along for the ride as a limited partner.

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