How to transition from an active to passive real estate investor. [short read] [video]

Transitioning from active to passive real estate investing can be challenging. Here are some tips to help you do it successfully.

last updated Friday, July 12, 2024
#active real estate investor #real estate investing strategy for passive income

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John Burson

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Real estate investing strategy for passive income

Passive real estate investing involves making a capital contribution to secure ownership interest in a real estate investment without active management. It is a long-term investment strategy aimed at building wealth. Although passive real estate investing does not require physical or mental energy, due diligence is necessary before investing through a fund, platform, or real estate company. Many passive real estate investments require a substantial initial investment and a sober understanding of their higher risks than other investments.

The transition from active to passive real estate investing strategies

Managing real estate investment properties can be full-time, but many investors want to transition from an active approach to a more hands-off one. However, before making this change, there are several factors to consider. Here are some tips to help you transition successfully from an active to a passive real estate investor:

Minimize your tax liability.

Consult with your accountant and tax attorney to ensure you are paying the necessary taxes. The more taxes you save, the more capital you have to reinvest.

Have a plan.

Get multiple opinions on what you can expect to net from the sale of your existing assets and determine the rate of return you need to generate the same or better cash flow. Research the property types and strategies you intend to reinvest in to ensure realistic returns.

Reinvest capital quickly.

Once you have cash from the sale, plan how to allocate it. The longer it sits idle, the more it can impact your cash flow.

Invest in what you understand.

Stick to property types and strategies you know and have earned good returns. Research how these investments will perform in the current market conditions.

Choose the right managers/partners.

Since you won't actively manage your investments, find professionals.

[video] Passive vs Active Real Estate Investor. Which One is the best fit?

 
 
 

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