Passive Real Estate Investing– Part 2
The passive real estate investing is a hands-off approach to investing. A benefit of this type of investing is that you don’t have to be an expert manager. You can participate even if you are new to the field of real estate investing.
The only thing required from a passive real estate investor is capital. The idea behind it is to allow knowledgeable people use your money for investment purposes.
Types of Passive Real Estate Investing
The passive type of real estate investing is further divided into 4 categories. Before jumping into this type of investing, the investors need to have a clear idea of their finances and the time for which they want to make the investment. Read along to know the different types of hands-off real estate investing.
Private Funds
Also known as private equity funds are models designed for people to pool their money and form a single big investment. This investment is then teamed up with limited liability and a manager or management group is responsible to make sure it is put to the right use.
Because of the presence of managers, the investors are not usually involved in the deals and they turn to whatever else they wish to do with their time. However, it is advised that before investing in such a bond, you must have prior knowledge of investing and you must make sure that the investment is made in the right place.
Opportunity Funds
The opportunity funds are similar to private funds. The process is similar, first, all investors pool their money and form a fund. Once it is formed, these investments are then taken to Qualified Opportunity Zones.
An opportunity zone is a low-income community which has been certified by the US Department of Treasury. This program helps in developing such communities by creating a room for investors. These funds offer tax lay-offs and the investment needs to be kept in the fund for a fixed time-frame.
REITs
REIT stands for Real Estate Investment Trust (REIT). This investment type is dedicated to investing in commercial real estate property. The REIT Company offers a variety of real estate deals to the investors. Investors can pick a property to invest and as a result, earn income from dividends.
It is advised that before investing in a REIT make sure it has an SEC registration. There are many private trusts running and people often get scammed.
Online Investment Platforms
The 21st century has rough online real estate platforms for investors, where investors pool their money and invest in real estate opportunities that have a huge magnitude. Through these platforms, people can invest in a variety of properties. These can be either debt or equity investments.
Also known as crowd-funding platforms, new investors find their feet in the real estate market from online investments.
Benefits of Passive Real Estate Investing
The benefits of this type of investing are as follows:
- The amount of capital required is low.
- The risks involved are negligible.
- If the investor is experienced, dividends gained can be solid.
- The tax savings are good.
Once the dynamics of how things work in passive real estate investing are understood. You can not only generate cash-flow but also broaden your investment portfolio.