When it comes to real estate, one of the first decisions you’ll need to make is whether to invest actively or passively. Both approaches have their upsides, but they cater to very different lifestyles and goals.
In this post, I want to help you figure out if passive investing in multifamily real estate is the right choice for you by breaking it down into a few simple questions and key insights.
Whether you're a busy professional, someone curious about real estate, or just looking for a hands-off way to grow your wealth, this blog is for you.
Should You Be an Active or Passive Investor?
The main question is this: Do you want to be hands-on or hands-off with your real estate investments?
For many, the idea of owning property and earning passive income sounds like a dream. But the reality is that managing real estate is far from passive—it’s a business, and like any business, it comes with challenges.
If you’re considering whether passive investing is right for you, ask yourself three key questions:
- Are you really busy?
If you’re working 50–60 hours a week in a demanding field like medicine, finance, or tech, carving out another 10–20 hours to handle real estate might not be realistic.
- Do you enjoy real estate management?
Let’s be honest—not everyone wants to deal with tenants, property managers, or renovations. If you’d rather avoid that altogether, owning your own rental property may not be the best fit.
- Do you want truly passive income?
Owning rental properties is rarely “passive.” While you can outsource tasks, you’ll still be involved in decision-making, problem-solving, and financial planning. Passive investing, on the other hand, offers a hands-off approach, letting you earn without the day-to-day headaches.
Why This Matters
If you ignore these questions and dive into real estate without considering your time, interests, and goals, you might find yourself overwhelmed and frustrated. Real estate is an incredible wealth-building tool, but how you invest will determine whether it adds value to your life—or just stress.
Passive investing offers an alternative for people who want to enjoy the benefits of real estate without taking on the work. But it’s not just about convenience.
The Pros of Passive Investing
So, what makes passive investing such a compelling choice? Let’s dive into the top benefits:
- It’s Truly Passive
Passive investing means you’re handing over the reins to experts. You’re not managing properties, dealing with late-night tenant calls, or overseeing contractors. Your time is valuable, and with passive investing, it’s yours to spend as you see fit.
- You Work with Experts
By investing passively, you’re leveraging the expertise of professionals who’ve been in the real estate game for years—sometimes decades. These professionals understand market trends, property management, and how to maximize returns. Their experience significantly reduces the risk compared to doing it all yourself.
- You Benefit from Economies of Scale
When you invest in syndications or larger deals, you’re part of something bigger—often involving hundreds of units. This scale brings lower management costs, better financing terms, and reduced risk.
For example, if you own one rental property and a tenant moves out, you might face months without income. In a syndication with hundreds of units, one or two vacancies barely make a dent in cash flow.
- Tax Advantages and Above-Market Returns
Syndications often offer returns that outperform the stock market over time. Plus, there are tax benefits like depreciation that can offset your income. While your money might be tied up for 5–7 years, the combination of cash flow and long-term appreciation makes the wait worthwhile.
The Cons of Passive Investing
Of course, passive investing isn’t perfect.
By handing over control, you’re trusting others to manage your investment. For some, that loss of control is uncomfortable.
Additionally, passive investments often come with a longer time horizon, meaning your capital could be tied up for several years.
But consider this: active investing requires significant time and energy. To make it work at scale, you’d need to build a team of professionals—costing anywhere from $50,000 to $200,000 a year. For most people, passive investing is the easier and more efficient option.
How to Get Started
If passive investing sounds like the right path for you, here’s how to take the next steps:
- Assess Your Goals: Determine what you want from your investment—cash flow, long-term appreciation, or both.
- Research Syndication Deals: Look for syndication opportunities led by experienced operators with a strong track record.
- Start Small: If you’re new to passive investing, start with a smaller investment to get comfortable with the process.
- Take Advantage of Resources: We’ve put together a free mini-course that explains everything you need to know about passive investing. It’s a great way to learn the basics and decide if this approach is right for you.
Final Thoughts
Passive investing isn’t for everyone, but it’s a fantastic option for busy professionals, people who want a hands-off approach, or those looking to diversify their portfolio without taking on the headaches of property management.
If you’re still on the fence, take some time to evaluate your goals, time commitment, and interest in managing properties. Passive investing can be a game-changer, but like any investment, it’s important to educate yourself and make informed decisions.
Until next time, keep taking steps toward your financial freedom!
To your success!
Michael Blank
