The work environment has changed tremendously over the last century. No longer are people just working on getting a paycheck to allow their families to survive. The workplace mentality has greatly shifted to working towards a purpose, not just a salary. People desire to be inspired, to commit themself to a main purpose, and enjoy the ride.
Investing passively has been long defined as a buy-and-hold portfolio strategy that is based on long-term horizons. While this broad definition does define many parts of various investment strategies, real estate buying requires more of a specific definition.
In regards to properties, passive investments are defined as purchasing rental properties without a substantial amount of active participation. Passive property buying can be broken down into two categories, which are direct and indirect.
Direct investments are described as an approach where the investor purchases a property that is already cash flowing. Upon purchasing the property, the investor will hire a property management company to handle the day-to-day tasks, such as collecting rent.
Indirect investments are defined as investments in REITs or real estate related mutual funds. In this scenario, the investor simply collects dividends from the funds, and there is no day-to-day management of the investment required.
As a passive investor, there are many benefits you can reap from this wealth-building strategy. You’re obviously aware of some benefits, which is why you’ve chosen this type of investment strategy. However, here are some other benefits that you may not have noticed yet:
Rental property buying is one of those strategies where you can utilize leverage in a good way. When we talk about leverage, we’re referring to taking out debt on the property. For example, your down payment may be 25 percent of the overall purchase price of the property. Instead of shelling out $100,000 for an investment property, you only need to pay out $25,000. Then, your incoming rent will pay the mortgage payment.
With rental properties, you can use this leverage advantage to scale up fast. Instead of buying just one investment property with your $100,000, you can use leverage to buy four properties, all valued at $100,000. This type of leverage is very hard to replicate with any other type of investment strategy.
Rental properties allows for easy diversification by nature. You can diversify in different types of investments, such as residential, commercial, and land lots. You can spread your investments across different geographical areas. You can opt for larger apartment buildings to decrease your risk of not getting paid rent. There are a plethora of diversification tactics you can enjoy within this one investment sector.
With many types of investments like stocks, you can’t change what the asset is worth. You’re stuck at the mercy of outside factors to determine value changes. With tenal properties, you can force appreciation on your properties. This means you can easily increase the value of your asset at any point in time.
Forced appreciation can be done in many different ways depending on the specific property you’re working with. A single-family home can be upgraded to include new appliances, better curb appeal, and even new countertops to enhance its value. Forced appreciation is always a viable strategy for passive rental property investments.
Passive investing can easily be done by pairing up with those who are active, seasoned rental property investors. These individuals are the ones who go out and find the deals. You simply partner up by bringing investment funds to the table and enjoy a portion of the monthly or quarterly revenue.
Seasoned investors know that their investment strategy works. And, they know that the more money they can get access to, the more prosperity they can build. Therefore, many seasoned rental property investors are happy to work with passive investors to purchase properties and share the rewards.
As an investor, it can be daunting at times to invest in strategies that you physically can’t see the investment. Things like stocks and mutual funds aren’t what we think of as tangible assets. They’re on paper, for sure, but they can’t be touched.
Investment properties, on the other hand, are tangible assets. You can physically walk through the investment property. You can drive by it and know that you own it. There’s a big mental win when you invest in tangible assets instead of intangible ones.
Hopefully, this shortlist of passive rental property buying benefits has helped to show you some advantages that you may not have noticed. We want to continue to renew your interest in passive rental property wealth building strategies. Let’s move on to thinking about your future and how this investment strategy will make a world of difference.
When the term generational prosperity comes up in conversation, many immediately think of the powerhouse families like the Rockefellers, Waltons, Mars, and Kochs. These families are known for having massive wealth. However, what exactly is generational wealth?
Generational wealth is simply defined as passing down assets from one generation to the next. There is no defining amount of value in terms of money that must be met. Some people refer to generational prosperity as passing down assets of knowledge, not money, to future generations. Therefore, the assets described from ‘generational prosperity’ can be defined however you would like.
For some investors, generational prosperity may define the passing down of a specific amount of money to each of your children. For others, it may include passing down a successful wealth building strategy alongside money that you’ve developed to ensure the wealth of your future generations. You’ll need to define your own meaning of what generational prosperity is for you.
We’ve all been there where we find it impossible to get the motivation to keep moving forward in an endeavor. However, once successful in another endeavor, we tend to look back to determine why this one worked, and the other one failed. Many times, our success level is defined by our purpose.
When you think about passive investments, you may think of the things you can buy or do in the future. However, that passion really starts to come to life when we think about how our efforts will affect the people we care about. When you think about passive rental property investing beyond growing your bank account, it opens up the possibility of creating things like generational prosperity.
A bank account is simply numbers on paper. Creating a plethora of properties that your family can reap the income of for decades to come is motivation at its best. To know that the investment decisions you’re making today can leave a major legacy for your children, grandchildren, and great-grandchildren, is to truly have a purpose.
When you can position yourself to have a purpose well above just personal gain, suddenly, working becomes a passion. You do it because you want to fulfill that purpose. You no longer just think of investing as a side job. You think of it as your strategy to leave behind a legacy. Instead of judging your wealth building progress based on dollar signs, you can judge it on personal fulfillment.
When you focus on just money, you’re eventually going to lose your desire to invest. As you reach your financial goals, you’ll start to notice that you don’t have a desire to continue to build. The money you thought that was going to make you happy suddenly doesn’t seem all that important. This is because you lose your desire to grow and develop.
When you put effort towards growing your riches with the intent of providing for future generations, you make better decisions. When you think about others, you consistently get a renewed sense of desire to grow and build. Working is done as a means to bring happiness to others, which, in turn, brings happiness to you.
Achieving prosperity through passive rental property purchasing is nothing new. Wise business people have done it for centuries. They’ve paved the way for today’s generations to grow their wealth portfolios and create lifestyles that they wouldn’t trade for the world.
Rental properties are a unique investment type that provides so many advantages. Immense leverage, forced appreciation, and being able to ride on the curtails of more seasoned investors are just some of them. Taking on the role of a passive rental property investor allows you to take advantage of all these amazing benefits.
As you continue to grow your assets through passive investing, it’s important to remember that you need to have a purpose. Whether your short-term purpose is to create a passive income stream that pays for your desired lifestyle or you have your eyes set on creating a legacy for future generations, you need to have a purpose to remain successful in this game.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.