How to 10X your passive income by real estate investment?

If you’re just starting to think about investing in real estate, you’ve probably thought about this question: should I pursue passive or active investing? It’s a good question and one that’s probably pretty hard for a newbie to figure out. In this article, we do a head-to-head comparison of passive vs. active investing. Bottom line: active real estate investing is generally more work, but you can make 10x more than you can with passive investing. 

While there are many factors to consider, one of the most important should be the return on investment. For example, if you knew that you could make 10x more with one investing option vs another, would that matter to you? It should.

So, which of these options can make you 10x more than the other? Let’s dive into passive and active real estate investing and find out!

What is passive real estate investing?

Passive investing is leaving the acquisition and management of properties to someone else. Someone else does the work and you passively receive a certain return on investment. 

There are many ways to invest passively in real estate: Real estate investment trusts (REITs), real estate funds, syndications, and crowdfunding. 

For this example, we’ll be focusing on real estate syndications. If you want to learn more about investing passively in syndications, CLICK HERE.

With syndications, the passive returns generally range from 10-15% on average. Some do better, some do worse. A common metric used by sponsors of these syndications is two times equity multiple in five years. This means that if you put in 4000,000THB in five years, you’ll get back a total of 8000,000 THB(4000,000 of this is your original investment). 

What is active real estate investing?

With active real estate investing, you do all of the work of acquiring and managing the property. Some also refer to this as direct ownership. 

The property can be of many different types: single-family homes, multifamily, commercial, retail, mobile home parks, and storage units. 

For this example, we’ll be focusing on multifamily rental properties. 

There are numerous approaches to investing in rental properties. Some people invest for market appreciation, some invest for cash flow — we do both, and then some. We call it The Fast FIRE System and combine all of the ways you can make money with these properties: cash flow, immediate appreciation, forced appreciation, renters paying down your mortgage, and tax savings. When you combine all of these and you do it the way we teach, you can achieve a very high rate of return. This return far surpasses what you would normally imagine you could make from rental properties as you’ll see from the example below. 

The passive investment scenario

The first thing you have to do when investing passively is to decide, where to invest this money.

Let’s assume you narrowed it down to investing in real estate syndications. Great.

Now you have to figure out where to find syndication opportunities. You certainly don’t want to use a Google search to find a random investment opportunity. Ideally, you know the deal sponsor or have friends who can vouch for the deal sponsor. 

[Looking for another vital member of your team? Be sure to check out our Vendor Directory to find our vetted and recommended team members]

You also want to get access to the best deals. One of the best ways to do that is to increase your deal flow. The more options you have to choose from, the better.

Let’s now assume you’ve networked, met some deal sponsors, and have started to get deal flow. The next task is to figure out where to put your money. How do you choose? You have to do your due diligence. The due diligence process is fairly involved, and you’d need a course worth of material to learn how to do it properly. 

Some shortcut this process by just investing with who they know. Someone they know says, “hey, you should invest in this deal.” Most of the investors we know do a cursory review of the deal before sending in their money.

Assuming you don’t short-cut it and actually do your due diligence, it’s not sounding too passive is it?

From there, you send in your paperwork to prove that you’re an accredited investor, you sign the paperwork the deal sponsor sends to you and then you wire 4,000,000.

Then over the next five years, you wait. 

The following is what the next five years feel like. 

You’ll get monthly or quarterly updates. Maybe the deal sponsor sends you a little bit of money over the five years, maybe not. 

If you need the money for some reason (maybe you have a family emergency), you can’t access that money. It’s completely illiquid. 

You’d have to achieve real estate professional status in order to do that.

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