5 Tips for Passive Investors In Real Estate
Passive investors love the thought of doing work once and being able to enjoy the returns and rewards over and over. They love watching money flow into their checking account repeatedly month after month and year after year off their initial investments. As they make investments that continue to give them good solid returns the process is to simply establish how much money you want to live on and establish how many properties it will take to generate that income and follow through. Once the initial investment is made, it becomes very easy to duplicate and watch the ROI increase until you are making the money you wish to make each year.
Building a passive investing business that replaces your current salary
Like building any successful business, real estate investing requires you to think of it as a business. The weekend investor can indeed invest in properties worth owning and to take that to the next level of building a passive investment that can replace your income requires a little more business acumen.
Successful businesses create systems that are duplicable. Similarly, investors identify their investment niche, they make investments and make notations of what works for them and what does not work for them. As you uncover what works best for you, you will want to simply repeat it over and over again.
DO! Copy Your neighbor
It is interesting that growing up in school we were always taught not to copy your neighbors. Now in the business world we are always taught to find the smartest in the field you want to know more about and copy what they are doing. This is definitely true in real estate.
Those who are successful have plowed the path and have made many mistakes along the way to discover what works best. You do not have to repeat their mistakes just copy what already works. Here are 5 things that successful passive investors do .
5 Steps To Building A Safe and Sustainable Passive Investment:
1. Researching markets: real estate is all about location. To you, as a real estate investor, locations should suggest a market that is poised and positioned to provide the best most sustainable long term cash flow and appreciation.
2. Researching the property: many skip the first step and start at researching property then later wonder why they cannot sustain the rents they were charging or keep the tenants they had. Within your property search make sure you are finding the best property to accomplish your investment criteria, this can be detailed but will be well worth the diligence.
3. Assemble a team: within the market you invest in you will want to have access to the best property managers and tradesmen to address repairs. You will want to set up your entity structure such as an LLC. All these people should work together to assist you with your investment criteria.
4. Instruct the team and let them run the business: as a passive investor the team should manage the property and take care of the day to day activity. You simply instruct them and they take over.
5. Collect and build passive income: build a safety net of 6 months worth of operating expenses and earmark 3 to 5% for repairs and vacancies that may occur and the rest will be a continued passive income. Now establish how many properties just like this you want to own to meet your goals and objectives and repeat.
To simplify these passive investments even further there are in many of the best locations turnkey companies that basically perform most of these steps for you. You can do all of the above on your own or by buying with a turnkey company basically purchasing the property along with the entire investment system in place.
With this method you are leveraging the benefit of economies of scale. Turnkey companies buy in bulk, rehab properties in bulk, and have all the vendors in place as well as property management and a tenant base. Your largest diligence then is on the turnkey company and confirming the property.