What Is Passive Real Estate Investing?
Real estate investment can be a lucrative means of diversifying your income streams. When you decide to invest in real estate using a passive strategy, you can have peace of mind knowing that the management of your investment is being handled by experienced industry experts.
Passive real estate investing requires less involvement from you, in contrast to active real estate investing, which requires you to pay more frequent visits to the property you are investing in.
But what exactly does it mean to participate in passive real estate investing, and what does it involve? Some of the things you need to know are included below.
Methods For Engaging in Passive Real Estate Investing
Crowdfunding
Crowdfunding gives investors the opportunity to acquire a portion of a property or development project, rather than full ownership. As it can be expensive to enter the real estate market, crowdfunding the acquisition of a property and splitting the expenses (as well as any future profits), can be an easier, cost-effective way to secure a property.
There are many different types of real estate, and each provide their own unique opportunities for wealth-building. For example, for a residential house or unit, a crowdfunding approach would allow each shareholder to take a split in the rent generated by the property. Whereas crowdfunding profit from other types of properties, such as large-scale developments, would be contingent on the price at which the properties are eventually sold.
Australian Real Estate Investment Trusts (A-REITs)
An A-REIT is a type of corporation that owns real estate that produces income for its shareholders. A-REIT’s provide investors with the opportunity to receive income in a pattern similar to the dividends that are generated by mutual funds, but without the inconvenience of directly owning and managing property. The vast majority of A-REITs are traded on public exchanges, just like stocks, which makes them more liquid than direct ownership of real estate.
Remote Ownership
Remote ownership gives investors the ability to own investment properties while still exercising control over their investments by working with a property manager. Investing in real estate remotely enables investors to acquire real estate properties and make a profit from them regardless of which state they are physically located. Investors now have the opportunity to own assets that do not have physical limits and generate passive income from them.
Advantages of Investing Passively in Real Estate
- Lower barrier to entry: To get started with passive real estate investment, there is not a significant amount of money that is required. Crowdsourcing and purchasing shares in an A-REIT are two methods that make it possible to buy an entire apartment complex even if you don't have the financial means to do so on your own.
- There is no need for in-depth expertise: To get started with real estate investing without active involvement, prior experience is not required. When you invest in an A-REIT or real estate fund, you won't have to worry about gaining experience in property management.
- More liquidity: When compared to active real estate investing, passive real estate investment provides increased liquidity and will require less of your time because you will not be responsible for monitoring the property.
- There is significantly less effort involved, as all that is required of you is to invest money and wait for it to increase.
Conclusion
A stable income can be generated through passive real estate investing without the hassle of active management or costly upkeep. It is a good option for those who don’t have the time to explore a more hands-on strategy.
Get in touch with us today to discuss your goals and see if passive real estate investing is a good fit for you.
Disclaimer: The information provided is for guidance only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. PRD will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.
