Lets talk about what kind of Real Estate Investor you are or you would like to become.
There are 2 types.
1. Passive Investor – That is the person that will look for other people to Invest with. They will do a Joint Venture with someone, invest in a Mortgage, finance someones Flip and fix. All kinds of ways to invest in Real Estate with someone else. DPlacing a second Mortgage on someones Investments.
A passive investor doesn’t need to know too much about Investing but they need to know the person they are working and investing with and building a trust with them so when they are working with this person they can sit back and relax, just like they do when they invest in other types of investments like stocks, bonds, mutual funds etc…Hopefully they can build up a trust and if that person or other people if there are others involved in the investment as they get to know the person(s)or that type of investment they will be able to reinvest. These types of Investments can be very lucrative for someone who is not that involved. These type of investments can vary from 10-20%. I have seen as high as 20%.
Passive means that they are not as actively involved as the other main investor, but the passive Investor is more involved than when investing in Mutual funds. A passive investor will want to know more about the company or person they are working with in this type of situation.
- Active Investor – This is the type of Investor that will be going out looking at properties, evaluating what the investment is going to be they are going to look at different ways they can make money in Investing. They will look at everything from rentals, flip and fix, Rent To Own, meeting tenants and so forth. They are very active on a day to day basis. If tis a fix and flip they will be managing the whole activity of renovations, contractors and problems with the renovations.
An active investor has to get very educated. You can get educated by taking courses, reading, learn by trial and error or partnering with someone who is knowledgeable. An active investor is extremely involved in all aspects of the Real Estate transactions from beginning to end.
- Combination – Maybe you are somewhere in between where you are an active investor but you farm out a lot or source out a lot so you are passive in that sense. It really depends on your risk level or how much time you have.
Part of getting into Real Estate Investing in the first place is because you want a better quality of life. Well if you become an active Investor and all of a sudden you are dealing with tenants, you’re dealing with contractors and you’re dealing with selling your property because its not selling in the time that you wanted or in the time you allotted to make sure its making a profit. And if all of a sudden the property is taking 3-6 months longer to close so now you have a negative cash flow.
So all these things you have to be very interested in or very involved in. Whereas if you are dealing with an expert who knows how to do these things and has a proven track record you can sit back and relax more as a passive investor.
I hope this helps whether you want to be a passive or active investor.