What is passive real estate investing?

  • 04 April 2022

Passive real estate investing is an investment strategy in which investors purchase properties to hold them for the long term, and collect rental income from tenants. The goal of passive real estate investing is to generate income without having to actively manage the property.

This is of course not easy as sounds. There are many challenges on the way, for instance, keeping your property in shape or managing your finances and insurance are only a few examples. However, if you have the patience and the discipline to follow through with a passive real estate investing strategy, you can achieve remarkable results.

Buy to let vs REIT investing through an ISA account.

Both are valid investment ideas. However, with a buy-to-let investment, you're essentially becoming a landlord, which means there's more work and effort involved on your part. With a REIT, you can invest in a professionally managed real estate portfolio, which offers the potential for hands-off returns. Of course, not all REITs are equal.

Some pros of passive real estate investments are as follows;

  1. It is a stable and relatively low-risk investment
  2. It can provide a steady monthly income
  3. You can use leverage to increase your return on investment

Some cons are;

  1. It is a hands-on investment, meaning you have to actively manage it
  2. It may take longer to see a return on your investment
  3. The property market can be volatile
  4. You must be prepared for vacancies and repairs/maintenance expenses

Overall, passive real estate investing can be a very rewarding way to invest your money. By doing your research, choosing the right property, and sticking to a long-term plan, you can create a solid foundation for your retirement plan.

Also, please note, that purchasing a property will be more difficult than buying stocks and shares so if you are unsure about how to get started, please consult with a professional.

For a property purchase, there are so many third parties and processes involved. But again, using leverage is a powerful motivator :)

The reason it is vital to seek professional help is that the government changes regulations and each investor's situation differs, therefore a few online searches would not be as beneficial as, say, sitting with an adviser and creating a plan that is personalised to what you want and when.

So there you have it - passive real estate investing in a nutshell! Of course, there is much more to learn about this investment strategy, but this article should give you a good starting point.

Happy investing!