#19: Active vs Passive Real Estate Investing

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Active vs Passive Real Estate Investing

As you know, I believe that investing in real estate is one of the best ways for physicians to create financial freedom. There are two major distinctions to be made when investing in real estate-active vs passive. It's absolutely essential that you understand each one.

In the beginning, you’ll have to put in the work in the way of due diligence and sweat equity. You’ll be glad you made the investment because the benefits continue after you put in the time and energy. One of the greatest advantages of real estate investing is you’re able to leverage that initial investment.

The reason I'm investing in real estate is not that I'm looking for another job. I enjoy my career as an anesthesiologist. However, I don’t want my life to be completely reliant on the income from my medical career. 

The direction of medicine appears to be changing. If you’ve been in medicine for a while you can probably see that. I absolutely believe that if you are not making changes now-you will regret it in your future!

Now, let’s look at five things you’ll learn about active vs passive real estate investing!

  • What is crowdfunding?
  • The importance of due diligence.
  • Which is better: active vs passive investing?
  • A look at the pros and cons of active vs passive real estate investing.
  • Which is the best way to run an investment property to optimize my return?

Here’s a breakdown of how this episode unfolds…

The key distinction is that when you are an active investor you are a landlord. It means that you actually own the property. It doesn't mean that's how you manage the property. That's another key distinction, but that you actually own it, meaning that you make all the calls for it. Your name is on the lease, and you're ultimately responsible for what happens with that property. You can make this process more active or passive depending on whether you decide to manage the property yourself. What I mean by managing is the day to day operations. Do the tenants need something fixed? Do you have to collect rent?

You should be thinking about what other investments to make to help you accomplish your goals, not spending time worrying about tenant calls for plumbing or noise complaints. If anything, the reason you bought these properties is to have more time to spend with your loved ones doing the things you love. So instead of taking those calls, I would much rather spend time hanging out with my family going to the park or going to the beach 

A real estate fund is typically made up of a basket of syndications. Meaning that you go out and you invest in a fund manager or operator. With that capital, they go buy a bunch of these apartment buildings and put that together. You're able to invest in multiple properties through one investment.

Now let's talk about the pros and cons of active versus passive real estate investing. Let's talk about active investing. One of the benefits and pros of active investing is the amount of control that you have. You actually own the property so you can make all the major decisions. Do you want to do some rehab? Do you want to fix it up? Do you want to color it a certain color? Do you want to change the name of it? Do you want to hold on to the property? Do you want to sell it? These are all your decisions to make when you actually own the property yourself.

Now let's talk about passive real estate investing. One of the greatest benefits is the time involved. When you're an active investor you are in it from day to day, especially in the beginning, once you hand it off to property management and the property is performing pretty well, you're probably putting a lot less time into it. But it does take some time to position the property and get to that place. 

And, if you haven’t done so already, let me know what you thought of this episode in one of our Facebook groups: Passive Income Docs or Passive Income Professionals

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