We have written about Active vs. Passive investing and Single families vs. Multifamilies, but the choice between actively investing in single families and passively investing in multifamily can actually bring someone to a fork in the road. I have done each and both are great paths to wealth creation through real estate, but they are done two different ways. Let’s start with the single family active investing route.
Active Single Family Investing
The idea here is to accumulate many single family rentals to hold for passive income. The great thing about this path is it can be done on your own and you can fully control your own investments. The not so great thing is very similar. Because you are using your own resources, your scalability is limited and your time is devoted to managing your personal portfolio, even if you have a property manager. I learned this after hiring a property manager to manage my rentals nearly a year ago.
If your goal is to have no more than a dozen rentals and you have the skillsets and desire to own single families, this could be a good path, but for many of us working professionals, we do not have that type of time and are unwilling to invest it for the small chance of actually gaining passive income that exceeds our w2.
Passively Investing In Multifamily
For many of us, we will simply find this the best route. Rather than buying 40 single families, which is what I calculated I would need in order to meet my passive investing goals, I chose to spend much of my investment capital to passively invest in multifamily. Simply put, my thoughts were that I would prefer to have a smaller piece of a much larger pie (passive investments in multifamily assets) versus the whole tiny pie (single family).
By passively investing in multifamily, I get to expose my investment capital to scale (more units) and exponential growth (value-add), allowing the apartments in which I invest to grow in cash flow value.
Here is another great part about passive investing: I do not need reserves to fix a roof, replace a toilet, or change an appliance. My passive investment is part of the total raise by the investment firm, much of which will be used for capital expenditures and reserves. On the other hand, as a single family investor, a sizeable portion of my cash must be ready to deploy towards those things…or else.
Time and Space
In 2021, I started to adopt this simple mindset of time and space. People think they want more money, but what they really (or should) want, is more time and space. Unlike money, time is finite, and for that reason, it should be more highly valued. For this reason, passive investing in multifamily give most people a greater return on both money and time.
NEXT STEPS
If you have not already, download our free Passive Investor Startup Guide and schedule your call with us to find out if passive investing in multifamily is right for you.
Safe Investing!
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