Investing In Rental Properties Versus Passive Real Estate

Investing In Rental Properties Vs. Passive Real Estate

Both rental properties and passive investing can be great options for building wealth, but they come with different risks and rewards. Before you decide which option is right for you as a real estate investor, it’s important to consider your goals and priorities. 

Rental properties can be a great way to generate income and build equity, but they can also be time-consuming and risky.

It’s important to do your research and be prepared for unexpected costs, such as repairs and vacancies. Passive investing is a less hands-on option, but there may be less potential for income and equity growth.

However, passive investments are typically less risky and can be a good way to build wealth over time. 

Ultimately, the best option for you depends on your individual financial goals and circumstances. Consider your priorities and do your research before making a decision. 

Continue reading below to examine the factors that you should consider as a real estate investor when comparing rental properties and investing passively.

Thinking About Your Investment Strategy

Two of the most common real estate investment strategies are investing in rental properties and passive investing. 

#1 – Rental Properties

With rental properties, you can potentially earn a higher return on your investment than with other types of investments.

You have control over your investment, and you can choose your own properties and tenants. When it comes to rental property investing, you can be as hands-on or hands-off as you want.

And you can deduct certain expenses from your income, such as mortgage interest, property taxes, and repairs and maintenance, which can lower your taxable income. 

It’s a great way to build equity into your property over time. But don’t forget that it can be more difficult and time-consuming to manage rental properties than other types of investments.

There is more risk involved with rentals compared to other types of investments. If your tenants don’t pay rent, you will lose rental income. It can also be difficult to find good investment properties within desirable areas. Not to mention, the maintenance and repair for rental properties come at a cost. 

#2 – Passive Investments In Real Estate Syndications

Passive investments are less risky than other types, such as stocks or rental properties. It’s less time-consuming and less expensive. Passive investments can also provide a steady stream of income.

While it may not provide the same level of income as other types of investments, there’s plenty of growth potential. More importantly, it’s all passive income, which means it’s a hands-off approach to securing your financial future.

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Budgeting for Real Estate Investments

Budgeting for investment properties is one of the most important aspects of buying and owning property. It is important to have a realistic budget to make sure that you can afford the investment and to make sure that the property is making a good return. 

There are a few things that you will need to budget for real estate investing:

  • Initial purchase price of the property, including down payment
  • Cost of maintaining the property, including mortgage payments
  • Cost of any repairs that may be needed at the investment property
  • Remodeling or updates that may be needed
  • Property taxes or insurance
  • Management or leasing fees
  • Potential vacancies or repairs

Your budget should also include enough money and reserve funds to cover any unexpected costs that may come up. It is also important to have a realistic idea of how much money you can make from the investment property.

You don’t want to budget for too much income, as this can limit your ability to make money from the property. But you also don’t want to budget for too little income, as this can lead to losses on your investment. 

The best way to create a budget for your real estate investment is to start with your overall goal for the investment. Are you looking for a property that will provide a steady income stream or a low purchase price? Are you looking for a property that will appreciate over time? Once you have a goal set, you can start to create a budget that will help you reach that goal. 

If you are looking for a property that will provide a steady income stream, you will need to budget for a higher down payment and try to find the right rental property. No matter what your goal is for an investment—rental property or passive real estate—it is important to create a realistic budget that will help you reach your goal.

Risk Tolerance

Before investing in any type of property, you need to consider risk tolerance. Renting out property can be a good way to generate income, but it also carries with it a certain amount of risk.

If your tenant stops paying rent, you could be on the hook for a significant financial loss. And if your property is damaged or destroyed, you could end up spending a lot of money on repairs or replacements. 

Passive investments, on the other hand, are a low-risk option. You don’t have to worry about tenants or repairs, and you don’t have to spend time managing your investment.

All you have to do is deposit your money and let the professionals do the rest. If you’re comfortable with a bit of risk, then renting out property may be the right choice for you. But if you’re looking for a low-risk investment, then passive real estate investing is the best way to go.

Benefits Of Passive Real Estate Investments

When you put money into passive real estate, you are essentially creating a business that will generate income for you even while you are asleep or on vacation.

This is a surefire way to secure your financial future and ensure that you have a steady stream of income even if you are unable to work. Passive investments typically require very little maintenance, which means you can spend your time and energy on other things.

This is a great option for those who don’t want to deal with the hassle of property management or repairs. 

More importantly, there are tax benefits. You can deduct many of the expenses associated with the investments, which can help you save money on your taxes.

Unlike other types of investments, real estate typically appreciates in value over time. This means that your long-term investment will become more valuable as time goes on, which can help you secure a healthy return on a great investment. 

Passive real estate offers a lot of flexibility, which is a major plus for many investors. You can invest in a variety of properties, which gives you more control over your investment portfolio.

Overall, putting money into real estate is a great way to secure your financial future and enjoy a variety of benefits. If you are interested, be sure to connect with our team. Learn more about real estate syndications and start securing your financial future.

Here at Goodegg Investments, we have a variety of options for you to help you learn about and invest in real estate so you can take advantage of the cash flow, equity, appreciation, and tax benefits. Below are a few resources to get you started.

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If you’re ready to invest right now, we invite you to check out our open deals page to learn more about our current or upcoming opportunities.

Learn More

If you’re not yet ready to invest but are curious about how all of this works, we invite you to dip your toe in the water with us through our free 7-day email course – Passive Real Estate Investing 101 – or to get a free hardcover copy of our book – Investing For Good.

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If there’s ever anything we can do to help you on your journey, feel free to email us at [email protected] or call / text us at (888) 830-1450

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