Passive Investing
"Landlords grow rich in their sleep without working"
John Stuart Mill
What is Passive/Active Investing?
Passive Investing
Passive investing is when an asset produces income that requires little to no effort to earn and maintain. Examples of passive income include rental income and any business activities in which the earner does not materially participate. The investment will require none of your effort or time. A wise man once said "The rich don't work for money, they have money work for them".
Active Investing
Active investing is a strategy that involves ongoing engagement and activity by the investor. As an active investor, you would acquire investments and continuously monitor them to make a profit. You will usually also have to deal with the everyday operations of the investment.
Passive Real Estate Investing
Many people see buying and renting out a property as passive real estate investing. They view this as passive income because, as they imagine the investment playing out, they will simply purchase a property, rent it out, and then collect payment from the tenants every month. But this is not true passive real estate investing.
At the least, the you would have to choose the property to purchase, consider the financing options, work with attorneys, contractors, brokers, and then with a property management company to make regular decisions about matters such as which tenants to accept, whether or not to repair or replace a leaking roof and when to renovate the property. In addition, if you decide not to subcontract these responsibilities to a property management company, you would have to manage the everyday responsibilities of maintaining the property by yourself. This is active real estate investing which requires time and experience.
A true passive real estate venture is one in which you merely invest a sum of money that others use to acquire, repair, maintain, and manage real estate properties to generate income on your behalf. As a passive investor, you will earn your percentage of the monthly, quarterly or annual returns as passive income, and that is all you are required to do for as long as the investment exists. If the property is sold, you also receive your share of the proceeds relative to your investment in the property that was sold. During the whole holding period, you have no concerns or worries, other than collecting your regular residual income.
Benefits of Passive Real Estate Investing
Passive real estate investing has many wonderful benefits and can be one of the most powerful ways to make your money work for you. Individual investors could experience both the universal advantages that apply to all investors, and many added benefits that they can appreciate in their unique situations.
1. The first, and most obvious benefit would be the gift of time. As any real estate operator can attest to, actively managing a real estate business is incredibly time consuming and stressful. With a passive investment, you get to choose what to do with your time without concern for your investment, whether it is to spend more time with family, generate income from other activities, or just doing something enjoyable.
2. When you are fortunate enough to work with experienced, reputable partners, not only are you ensured that every aspect of the process is executed efficiently and at a high level, it also provides you with a greater peace of mind knowing that your day-to-day administrative duties are are in capable hands.
3. Even some of the most sophisticated investors sometimes lack the in-depth knowledge in specific niches, making it difficult to fully diversify into a full variety of assets. No one is an expert at everything. Passive investments make true diversification possible by allowing you to invest and collaborate with specialists, each in their respective field to produce the perfect end-result; a diverse portfolio of high-quality, well managed passive investments.
This is why, at Bridgehall Group, we hand-pick our select group of strategic partners and associates. Utilizing our close business relationship with some of the industry’s most prominent and established investment groups, we present a winning combination of experience and reputation, creating a true passive investment opportunity.