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What is Passive Investing?

Picture this: Your bank account is growing steadily, but you’re doing very little to make it happen. In fact, your money is doing all the work, along with a talented investment sponsor.

Sound good? Read on. We’d like to introduce you to passive investing.

Definition of Passive Investing

At its most basic level, passive investment is any income stream that reliably provides value with minimal work. It’s a way of making money without necessarily having extensive investment knowledge, education, or skill. 

Although it involves locating and joining an investment group, along with making an initial monetary investment, over the long term the passive investor sees big rewards with minimal day-to-day effort. Real estate is a lucrative channel for passive investing and usually involves either working to create new development projects or pursuing a redevelopment strategy of adding value to distressed properties.

Managing new development projects is typically a more time-intensive route that involves more risk, compared to redevelopment. By contrast, distressed property investment is a type of redevelopment that builds investor value through the inherent value of existing properties, plus economic shifts, property upgrades, and new marketing techniques.

Why Pursue Passive Investing?

Passive investors have many motivations. They may need extra income or want to build a savings/retirement plan. Often, it’s a way of building a better future for their family while still fulfilling existing obligations, like working a full-time job. All passive investors have one important thing in common: They’re looking for a way to build wealth with minimal time investment. 

In order to be comfortable with this type of investing, you must be willing to give up some level of day-to-day control over the actual investment itself. The sponsor manages the details of the deal and is the person who will be hands-on with the project. If you’re the type of person who prefers to be extremely involved in your investments, especially when it comes to a real estate project, a passive investment might not be the ideal fit for you.

It helps to have a bit of knowledge about investing, financial planning, and/or real estate, but it’s not a requirement. The sponsor brings the intellectual capital needed to launch and maintain the project. For many people, this is enormously attractive and makes passive investment the best fit for them.

Benefits of Passive Investing

Passive investing fits right into the lifestyle of busy people who need extra income without extra effort. It stops the cycle of living on limited finances and opens up your options.

Passive investing can cover your monthly bills, allowing you to start working part-time and/or be a stay-at-home parent. It also builds your savings, which could allow you to start a new business or further your education.

For parents, this could be the way you create a college tuition fund for your child, cover their medical bills, or take the whole family on a dream vacation. You could even support an aging parent and pay for them to enjoy life in a beautiful retirement community.

Passive investing also doesn’t come with a price tag that’s out of reach. Although some investments might require you to put up a large amount of money, like $500,000, you can usually join real estate syndication for a minimum investment of $50,000. 

To learn more about passive investing, download our free Guide to Passively Investing in Commercial Real Estate below:

A Guide to Passively Investing In Commercial Real Estate

You can also listen to the Real Estate Syndication Show podcast, which is full of helpful information about passive investing. And when you’re ready to start your personal investment journey, contact Life Bridge Capital to discuss forming a passive income partnership.

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