Oct 29, 2021 5:10:00 AM | 4 Min Read

Starting Passive Real Estate Investing: What To Know

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KRI Partners
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Starting Passive Real Estate Investing: What To Know

Want to be a passive investor, but you don’t know where to start?

Everyone knows you can make a ton of money being a passive investor, especially if you decide multifamily real estate investing is right for you. The problem is, you have to figure out how you are going to get your share of that money!  

Before we dive in, there are a few things you need to know.

  • It’s a process – It is not a get-rich-quick scheme!
  • Who you invest with is as important as what you invest in.
  • The benefits of investing in real estate are far greater than those offered by typical investments like stocks and bonds.

Let’s dive in!

Passive Real Estate Investing is Not a Get-Rich-Quick Scheme

Everyone is always looking to make a quick buck. The problem is, most of the so-called “get-rich-quick” schemes require you to take on a ton of risk in order to potentially earn the big money. Many of these schemes could easily be classified as speculative. A few people win big, but most don’t.

Personally, I would much rather invest in something that has a much greater chance of getting me to where I want to go without all the crazy levels of risk. That “something” for me is multifamily real estate investing.  

Passively investing in multifamily real estate gives you the opportunity to earn extraordinary risk adjusted returns. You can earn 15%, 25%, even 35%+ annual returns investing in multifamily real estate. Do this for a long period of time and before you know it, your nest egg has doubled, tripled, even quadrupled!  

Notice I said, “do this for a long period of time.” That’s the key with real estate. Stick with it and the chances of reaching your lofty goals are very high!  

Who You Invest With is as Important as What You Invest In

I won’t tackle the issue of what to invest in for this article, but I do think it is important to say a few words about who you passively invest with.

When vetting potential sponsors and fund managers, focus on these things initially.

  • Experience
  • Track Record
  • Transparency

Experience is more important than anything else. Remember this – you are investing in a live business and that business is just like any other business, except this one is apartments (assuming you invest in multifamily real estate). They have the same challenges every business has, including, marketing, sales, employees, operating procedures, accounting, etc. You need a senior management team that can solve complex business problems and can react to a dynamic business environment and that can only come from experienced people.

Track record is also extremely important. You want to know that the Sponsor or Fund Manager has “been there, done that” and that they have been successfully doing it!

Finally, and this ties everything together, make sure the Sponsor or Fund Manager you passively invest with is transparent.  If you start asking them questions and they begin to dodge the questions or they aren’t willing to show you a verified track record, then you should not invest with them. If they aren’t willing to show you what’s going on now, they definitely won’t be transparent after you invest with them.

There is a lot to know to be comfortable passively investing in multifamily real estate. Having said that, it is definitely worth taking the time to become familiar with some of the nuances associated with passively investing in real estate. The long-term payoff could be huge!

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