Founder, CEO of Blue Lake Capital LLC. Helps passive investors increase their wealth through real estate. Podcast Host: REady2Scale.
Working for an employer has many benefits, from health care benefits and pensions to paid vacations, vacations and a fixed salary. However, for many people there are also disadvantages, the biggest of which is that you don’t have complete control over your own future. For those seeking a stable income and wanting to take control of their own destiny, moving to full-time passive real estate investing 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, eventually becoming a syndicator and multi-family home operator in the US
If you’re willing to give up the security of a steady salary and benefits in exchange for a chance to earn an income from your efforts, passive real estate investing may be right for you. Sure, there are many pros and cons to consider, and there are also risks to evaluate, but there are also benefits that can far outweigh the risks. If I’ve piqued your interest, read on as I discuss finding success as a full-time passive real estate investor and take a look at how to get started.
What is a passive investor?
Passive investing simply means investing your money in a real estate deal, but you are in no way involved in the management or operation of the property. Instead, you pay others to take care of things for you. Otherwise, you will be considered an active investor.
For example, if you buy a single-family home as a rental home, if you are the one who collects rent from tenants or engages repairers, you are not a passive investor. Most passive investors invest their money in syndicators, funds or REITs and let professional firms manage the assets from start to finish.
Take control of your time
Many people who have moved out of business tend to put “control of their time” at the top of their list of benefits, while others state that saying goodbye to their boss is number one. However, others argue that choosing your own hours should be at the top of every list. For those who have been working from home because of the pandemic, the thought of not having to go back to a long daily commute would be on their list of benefits. Whichever way you choose to rank the downside of a nine-to-five job, realize that there are many benefits to transitioning your career to full-time passive real estate investing.
A word of caution, however, is that it takes time to build wealth as a passive investor. For example, if you earn a salary of $150,000, it could take years to earn that amount as a passive investor through income and appreciation of the real estate deals you invest in. For example, if you invest $100,000 of your savings in a deal and receive a conservative 8% cash-on-cash return, you’ll make $8,000 a year. If the property is sold after 5 years, or whatever the holding period is, your $100,000 becomes $200,000. Invest that money in another property and in five years you will have doubled your money again to $400,000. This is just an example, but that’s why I’m warning people that it takes time to build wealth.
Passive does not mean that there is no work werk
Despite what many imagine, passive investors really work. However, they work for themselves and often enjoy every minute of every day. Your day will consist of evaluating deals, meeting syndicators and vetting them. You want to make sure the syndicator’s investment goals are aligned with yours, and you want to look at their past performance before investing any money.
You will also continuously assess new investment opportunities and vet these deals as potential investments. It’s a continuous 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 attend workshops to learn more, and some passive investors even hire a mentor to gain knowledge. This is standard industry practice as many successful investors have been coached by other investors who have achieved significant success.
Leaving business to become a full-time passive investor is a journey. It starts with evaluating the pros and cons of leaving your safe paycheck behind and evaluating the risks and rewards you will encounter along the way.
Many people have walked away from a nine-to-five job to become full-time passive investors. I did and I have absolutely no regrets. If you are passionate about real estate investing and working for yourself, this is a great way to build wealth. Realize that it takes a lot of hard work and time to earn money comparable to what you earned while working for someone else.
Start educating yourself through blogs and podcasts from successful real estate investors. You can also attend workshops to gain knowledge and even find a job as an investor mentor. Spend your time reviewing deals and meeting syndicators and be sure to vet them before investing your money.
Prepare to work hard, but if you’re like me, you’ll love every minute of it.
Pyjama People Real Estate Council is an invite-only community for real estate executives. Am I eligible?