Founder, CEO of Blue Lake Capital LLC. Helps passive investors grow wealth through real estate. Podcast Host: REady2Scale.
getty
There are many advantages to working for an employer, from healthcare benefits and pensions to paid holidays, vacations and a secure paycheck. However, for many individuals, there are downsides as well, and the biggest one is not having total control over your own future. For those who are looking for a stable income as well as taking control of their own destiny, transitioning to full-time passive investing in real estate is a viable alternative. I can say this from personal experience as I left a comfortable corporate job in the tech industry to become a full-time passive investor, ultimately becoming a syndicator and operator of multifamily properties across the U.S.
If you’re willing to give up the security of a steady paycheck and benefits in exchange for an opportunity to earn an income based on your efforts, passive real estate investing could be for you. Certainly, there are many pros and cons to consider, and there are also risks that need to be evaluated, but there are also rewards that can far outweigh risks. If I’ve piqued your interest, then read on as I discuss finding success as a full-time passive real estate investor and offer a look at how to get started.
What Is A Passive Investor?
Passive investing simply means you invest your money in a real estate deal, but you’re not involved in any way in the management or operation of the property. Instead, you pay others to manage things for you. Otherwise, you’re considered an active investor.
If you purchase a single-family home as a rental property, for example, if you are the person who collects the rent from tenants or calls in repair people, then you are not a passive investor. Most passive investors invest their money with syndicators, funds or REITs and let professional companies manage the assets from start to finish.
MORE FOR YOU
Taking Control Of Your Time
Many individuals who have transitioned out of corporate life tend to rank “taking control of their time” at the top of the benefits list, while others state that saying “goodbye” to their boss is ranked number one. Still, others claim choosing your own hours should be at the top of any list. For those who have been working from home due to the pandemic, the thought of avoiding going back to a long daily commute would rank on their list of benefits. Whatever way you choose to rank the downside of a nine-to-five job, just realize there are many benefits to transitioning your career to full-time passive real estate investing.
One word of caution, however, is that it takes time to build wealth as a passive investor. If you’re earning a salary of $150,000, for example, it might take you years to earn that amount as a passive investor through income and appreciation of the real estate deals you invest in. As an example, if you invest $100,000 from your savings in a deal and receive a conservative 8% cash-on-cash return, you’ll earn $8,000 each year. If the property is sold after 5 years, or whatever the hold period is, your $100,000 will become $200,000. Invest that money in another property and in five years you’ll have doubled your money again to $400,000. This is simply an example, but that’s why I caution people that it takes time to build wealth.
Passive Doesn’t Mean No Work
Despite what many envision, passive investors actually work. However, they are working for themselves and are often enjoying every minute of every day. Your day will consist of evaluating deals, meeting with syndicators and vetting them. You’ll want to be sure that the syndicator’s investment goals are aligned with your own, and you’ll want to look at their past performance before investing any money.
You’ll also be constantly reviewing new investment opportunities and vetting those deals as potential investments. It’s an ongoing learning process, but the time you spend educating yourself will make you a better passive investor. Read blogs and listen to podcasts from successful real estate investors. You can also go to workshops to learn more, and some passive investors even hire a mentor to gain knowledge. This is a standard practice within the industry, as many successful investors were coached by other investors who have achieved substantial success.
Summary
Leaving corporate life to become a full-time passive investor is a journey. It starts with evaluating the pros and cons of leaving your secure paycheck and evaluating the risks and rewards that you’ll encounter along the way.
Many people have walked away from a nine-to-five corporate job to become full-time passive investors. I did, and I have absolutely no regrets. If you’re passionate about investing in real estate and working for yourself, it’s a great way to build wealth. Just realize that it will take a lot of hard work as well as time to earn money comparable to what you were making while working for someone else.
Start by educating yourself through blogs and podcasts from successful real estate investors. You can also attend workshops to gain knowledge and even find a position as a mentor to an investor. Spend your time reviewing deals and meeting with syndicators and be sure to vet them before investing your money.
Prepare to work hard, but if you’re like me, you’ll enjoy every minute of it.
Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?