Wishing you had a steady income stream without too much risk? Good news: A passive real estate investment provides a reliable flow of income without putting your money in jeopardy.
This is an especially low-risk option when handled correctly with the help of a talented and experienced sponsor. Here are the key things you need to know about developing a passive income.
What Is Passive Income?
Passive income puts your money to work for you. It’s a form of investing where you provide the financing, but an expert manages the details of the deal using their own intellectual resources. There’s little to no daily work on your part.
Over time, the invested funds grow in value, and you take dividends at certain intervals or when the project concludes. As a passive investor, you can focus on other things in your busy life while your investment is building your wealth in the background.
Passive Investment and Real Estate Syndication
Real estate syndication is a form of passive investment that leverages the power of the lucrative real estate market for your benefit. Multiple passive investors provide financing through a syndication structure, and a sponsor manages the details of the real estate investment project.
You can pick and choose which projects you invest in, so your investments are always the right fit for your budget and portfolio. But you don’t have to worry about every little detail that comes along with a real estate investment, like visiting properties, hiring contractors, finding renters, and so forth.
Syndication is considered a type of passive investment because the individual investors are not involved in the day-to-day decisions or operational responsibilities of the project. Instead, they provide capital and wait for a return and the sponsor does the rest.
This means the sponsor identifies a viable project, sets terms with investors, invests in the property, oversees value-building, answers any questions that arise, and distributes payments as arranged. It’s easy to see why this is a low-stress approach for the average investor.
Multifamily Real Estate Investment
Multifamily syndication is a type of real estate syndication that specifically targets family housing in multiple units — usually apartment buildings, but sometimes condos and mixed-use properties. While there are many options for real estate investment, multifamily projects tend to bring the biggest benefits for passive investors.
- Allow truly passive investment when paired with syndication
- Are lower-risk investments, even during economic downturns
- Build slow, steady, reliable value over time
- Provide a solution to the nationwide and global housing crisis
These projects also have a relatively reasonable level of entry in terms of the investment amount. You can usually join a commercial/multifamily real estate syndication project with $50,000 and some basic financial credentials.
Minimize Risk by Preventing Common Mistakes
If this type of investing sounds like it’s the right fit for you, your next step is to find a syndication sponsor and ask them which projects will be open to investment soon.
Keep your risk to the minimum by working with an experienced and reputable sponsor who can help you avoid common mistakes. Ask questions about the investment terms and make sure the project matches your risk tolerance. The more you learn now, the more you can relax later with peace of mind that you’ve already made precisely the right investment.
Before sealing the deal on your first investment, we encourage you to read our whitepaper, Passively Investing in Commercial Real Estate. It’s full of helpful tips for starting out as a passive investor and making smart choices from day one.
For more information about low-risk investment options, contact Life Bridge Capital today. We’ve helped hundreds of investors just like you find the ideal path to passive income.