I talk a lot about the value and the specifics of passive real estate investments. I’ve even written a book about the subject. But how do you know whether passive investing is right for you?
This article looks at 10 signs that passive income could suit your circumstances.
I’m going to start with the pretty safe assumption that you have a good reason for considering adding passive income streams to your life. The people in my Picheny Investors Club often tell me the same things when they join:
- I want to build a travel fund.
- I want to support a passion project.
- I’d like to work less hours.
- I want to save for retirement.
- I want to put my kids (or grandkids) through college.
Rather than waste your time and sell you a dream, I’d prefer to show you 10 signs that passive income investment could be a good fit for you.
Will it be right for everyone? No.
Could it be right for you? Maybe.
Let’s dig in.
1. You Have Money Sitting In The Bank
The doctors, lawyers, and other professionals I tend to work with don’t get richer by leaving their money in the bank and hoping for the best. The small amount of interest their cash earns while sitting in the bank doesn’t even keep up with inflation. With my help, they take action to make smart passive investments.
If you have resources at your disposal, use them. Make smart investments so your money works for you, instead of the other way around.
I should be clear early on that the dollar amount for these passive investments in real estate isn’t what most people consider small. I’ve seen some passive investments at the $25,000 level but in practice, most tend to have a minimum investment level of $50,000.
While these passive deals offer the potential to double your money, their lifespan is often in the region of between 5 and 7 years. If you’re hoping to make a quick buck, this isn’t for you. (Roulette and Blackjack aren’t for me. I like my bets to win.)
2. You’ve Maxed Out Your 401(k)
Without getting into the debate on the benefits of retirement accounts, let’s assume you’ve chosen to go down that path. Most people aren’t fortunate enough to have money burning a hole in their pocket but if you’ve already reached your 401(k) contributions limit, you might be looking for places to invest whatever additional income you may have.
Since retirement account offerings are usually limited, looking for another place to invest with proven long-term returns, such as real estate, may be a wise decision. And specifically, passive investing is an easier way to get a return from real estate without having to do the deep work or take the major financial risks inherent in developing and operating these deals.
3. Your Retirement Money Is Solely In Stocks And Bonds
Maybe you’ve made a wise investment in stocks and bonds that you’re sure will give you a good return in the long run.
It’s also possible that betting your entire nest egg on the market doesn’t fill you with as much confidence as it did when you set things up with your advisor. What if those stocks don’t fulfill their promise? What if the dollar devalues when the next unexpected global event happens?
One of the long-held truths about investing is that there’s nothing quite like having money in physical assets such as houses and other property. Time has shown for decades — even centuries — that bricks and mortar is a winning bet in the long run because people will always need somewhere to call home.
4. You Can’t Work Any More Hours
For most of us, work ends up being the act of trading our time for someone else’s money. That’s great if you can charge huge consultancy fees, but we all reach a limit somewhere — either in the value we’re able to offer or, more often, in how many hours we have available.
If you’re at capacity and can’t push that needle any further into the red zone, you either need to settle with what you’ve got or find a smarter way to use your time and resources.
What I love about passive investing is that, from the investor’s point of view, there’s no ongoing time requirement once a deal has been researched and agreed upon.
The upfront effort of some due diligence and perhaps some advice from someone who’s been there and done it before (hello!) means that your time can be used to do something else while your real estate investment is managed by an experienced group of sponsors.
And while you’re busy doing your thing, your money is at work and you should start receiving distributions and eventually a nice profit when your property is ultimately sold.
That’s a much smarter use of your time and certainly beats having to wake up an hour earlier in the morning or sacrificing another evening with loved ones just to get more tasks done.
5. You Want To Reduce Your Work Hours
Maybe you have the capacity to keep putting in the hours, but does that mean you have to?
There shouldn’t have to be a hard limit just for you to come to the realization that there are other meaningful things you can do with your time. Perhaps you decide that you want to do less, for all sorts of reasons — so you can spend time with kids and grandkids, go on vacations, give back to your community, perfect your golf swing, or whatever.
The point is that cutting back on your hours doesn’t necessarily mean that your income has to shrink. If you have resources to invest, a passive income stream has the potential to let you drop some unwanted hours from your schedule without affecting your net earnings. Get into the right deals and you might even earn more.
6. You Don’t Want To Trust In Wall Street
Who can blame you? The traditional stock market doesn’t suit many people, and increasing globalization and the pace of technological change means that markets that used to be quite stable and predictable are now prone to much greater uncertainty.
You might also be ethically opposed to Wall Street, or in particular industries or companies, in which case no amount of market stability and potential returns would ever sway you.
If you’d rather trust in the intrinsic value of property rather than some stocks of dubious real value, passive investment could be for you.
7. You’re Uncertain About Your Career Future
Even if the workplace has been good to you in the past, you might have realized that the idea of a career for life doesn’t come with the same guarantee it did when our parents were growing up.
These days, the pace of technological change and the increasing move towards working from home means that the concept of the modern workplace is evolving, and people are racking up multiple careers before they head towards retirement.
And that doesn’t just apply to Silicon Valley and its young tech whizzes. Even in traditionally stable professions such as medicine, we’re seeing private doctors’ practices being squeezed out by the march of bigger corporations. Is your own work truly immune from disruption?
Few can predict with any confidence what they’ll be doing in a decade’s time, so if you’re tying your financial future to the assumption that you’re going to land on your feet, it might be worth thinking about strengthening your hand with multiple streams of passive income.
8. You’re Unhappy With Your Job
I can’t make you like your job and neither can I show you a magic button that will let you switch to your dream job.
But maybe there is a way to make your resources work for you such that your financial situation improves to the point where that job you’re doing no longer has the importance in your life it once did.
For some people, their passive income through real estate investments offers the potential for them to earn more than their day job does anyway.
That’s certainly not the case all the time — the reality is that passive income tends to be part of the mix rather than the whole show — but anything you could do that involves little to no ongoing effort but still provides income has to make it easier to deal with a job you’re not in love with.
Who knows? Maybe a side gig like passive income generation could buy you the mental space you need to find something that suits you and your family better.
9. You Watch Real Estate Shows!
This might feel like a bit of a non-reason, but I’ve found that I’m genuinely interested in the process of creating deals for properties, improving those properties, and then having that feeling of satisfaction of earning a profit from knowing that those improvements added real value.
This is not just about “put ten bucks in, get twenty bucks out.”
So, if you’ve been interested in TV shows that reveal what it’s like to renovate homes and add value to them, you too might enjoy putting some of your resources into making that happen in real life through a syndication with others.
10. You Already Know You Qualify As A Potential Investor
If you’ve been reading the rest of my blog, you may remember that I’ve previously talked about the differences between being an accredited and a sophisticated investor.
This is an essential requirement if you’re ever going to be a legitimate investor in passive real estate deals. Part of my work in the Picheny Investors Club is to ensure that the people I talk with meet this requirement so that I’m allowed to deal with them and confident that they understand what’s involved.
If you’ve done your research and know that you already qualify as either an accredited or sophisticated investor, you’re primed to join a syndication that can help you earn passive income from real estate deals. In this case, we really should talk!
Is Passive Investing Right For You?
Even if you check most or all of these boxes, it’s possible that passive investment won’t be the right choice for you. If you’re still not sure, get in touch and let’s talk.
It’s not in my interests to sell an idea to you that won’t benefit you, but if any of the signs above stirs your interest and you want to see what’s possible to maximize the way your money works for you, I might be able to help.
I work closely with the people in my Investors Club to give them the best deals and the greatest chance of success with their investments. Join today and you’ll be on your way to making passive investments work for you.