real estate
That’s just one example of active real estate investing, and there are dozens of ways to invest in real estate in very active ways, totally passive ways, and everything in between.
The way I think about whether an investment is active or passive has to do with the amount of ongoing work is involved to maintain the investment.
Owning rental property is definitely active if you’re self-managing. This means that you purchase rental property, lease it to tenants, and handle all of the property management issues like collecting rents and dealing with maintenance calls.
What makes a real estate investment truly passive is not directly owning the property yourself. In these cases, you are definitely not the landlord. Examples of investments like these include syndications, real estate funds, crowdfunding opportunities, and REITs.
Active Investing: Pros and Cons
Pros Control – When investing in a more active way, the investor has the most control of these investments. Cons Experience – Active investments require a bit more knowledge on actual operations in order to be successful.
Passive Investing: Pros and Cons
Pros Time – It’s passive, meaning that most–if not all–of the work done by the investor is upfront. Cons Lack of control – Since you’re not completely in charge in this situation, you’re relying on management to make the best decisions for the project.
When choosing an investment for yourself, it’s important to ask what you want out of it. Find a deal that matches your goals and go for it.