What is Passive Investing

Written by David Pereira

Managing Partner and Co-Founder

March 26, 2023

“I don’t want to do any of the work. I don’t want to deal with tenant complaints. I don’t want to hear about a leak. I just want you to take my money and give it back to me in a few years along with a profit that justifies the risk”

The typical passive real estate investor

“I don’t want to do any of the work. I don’t want to deal with tenant complaints. I don’t want to hear about a leak. I just want you to take my money and give it back to me in a few years along with a profit that justifies the risk”

This is the philosophy of most passive investors I know. They know that real estate has a long history of providing healthy returns but have heard some of the horror stories that active real estate investors will gladly share as though it’s a badge of honour.

Real estate investing has become a popular way to generate income and build wealth. Like any other solid business, if you provide a good product for customers, the cheques will come in every month. However the size of those cheques can vary depending on the amount of work you’re willing to put it.

If you’re like the people in the picture above and would rather sleep in past 10am on a weekend rather than addressing a tenant call, then passive real estate investing might be for you.

What is Passive Investing?

Passive real estate investing refers to any investment in real estate that does not require active involvement from the investor. This means that the investor is not responsible for day-to-day management tasks like finding tenants, collecting rent, or handling repairs and maintenance. Instead, the investor is essentially a silent partner in the investment, providing capital and sharing in the profits.

An important distinction for passive investing is that it works even when you’re not working. You aren’t trading your time for money. You aren’t actively managing it. You’re investing money in something that operates and grows your wealth without you needing to expend energy.

If you don't find a way to make money while you sleep, you will work until you die - Warren Buffett.

If you don’t find a way to make money while you sleep, you will work until you die – Warren Buffett.

REITs

There are a few different ways to invest passively in real estate. One common method is through real estate investment trusts (REITs). These are companies that own and operate income-producing real estate properties like apartment complexes, office buildings, and shopping centers. Investors can purchase shares in these companies and receive a portion of the rental income generated by the properties. REITs offer investors an opportunity to invest in a diversified portfolio of real estate assets, without having to own or manage the properties themselves.

Here is a good article on Canadian REIT’s- https://www.fool.ca/investing/top-canadian-reits-to-invest-in/

I personally have invested in REITs and will continue to do so. But I’m pretty wary right now of commercial office REITs given that many office buildings still have high vacancy.

Rent-to-Own Investing

Rent-to-own investing is a great way to earn passive income from real estate. It allows investors to collect rent and make a profit from the sale of the property without having to manage the property long-term. Rent-to-own investing is particularly attractive to investors who are interested in real estate but do not want to be landlords or take on the risks associated with flipping properties.  

The key to rent-to-own investing being a passive investment is in the management of the property and the tenant buyers. Rent To Grow Homes handles both of those things. Once the lease agreement is in place, the investor’s role is primarily to collect rent payments. The tenant is responsible for day-to-day management tasks like handling repairs and maintenance and paying utilities.

We have implemented a few unique features then help us make the investor experience as passive as possible:

  • RTGH takes care of all tenant questions and comments
  • RTGH conducts quarterly property inspections
  • RTGH conducts semi-annual credit counseling session with tenant buyer
  • RTGH provides Investor with semi-annual update on property by email
  • RTGH has a team of experts (mortgage broker, lawyers, realtors, credit counselors, property inspectors) to handle all situations

Great Returns Without the Hassles

Passive real estate investing is a great option for investors who want to generate income from real estate without the hassle of day-to-day management tasks. Rent-to-own investing is just one strategy that fits into this category, offering investors the potential for passive income with a relatively hands-off approach. As with any investment strategy, it’s important to do your research and understand the risks and rewards before making any investment decisions.

If you’re interested in investing passively with Rent To Grow Homes, check out our investor page and fill out the form. Or reach out to David at info@RentToGrowHomes.com.

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