Thinking about investing in real estate? Want to own a couple single family homes, maybe even 2-4-unit homes and rent them out?
Become a big-time landlord and live off the “passive income” from your rental properties?
Here’s my advice:
Don’t do it.”
Meet Jamie Landlord.
Jamie once heard the news about financial freedom and all the wealth that you could build from real estate, so Jamie decided to buy a single-family rental property. It wasn’t long before Jamie realized the house was a money pit. Every time there was good cash flow, something broke and needed to be repaired. Even worse the tenants stopped paying and the eviction is moving slow as a sloth costing Jamie even more money.
Jamie decided to buy a single-family rental property. It wasn’t long before Jamie realized the house was a money pit.
If you are interested in investing in real estate, a friend with good intentions may have told you the story of Jamie Landlord when you spoke about your investment plans. That friend may have wanted to get into real estate themselves but heard about Jamie Landlord and decided to sit on the sidelines and not invest. That friend might even be Jamie Landlord!
Even worse, you may be Jamie Landlord and are about done with real estate investing! You are wondering what happened to “passive income”? Between the “tenants, toilets and termites” you are working more than you expected.
Misconceptions About Real Estate Passive Income
The reality is that real estate investing can provide passive income but owning and managing small rental properties is anything but passive. This is in fact active real estate investing.
Put simply the only true way to be a passive investor and earn passive, hands-free, “mailbox-money” is via passively investing in a real estate syndication. Private real estate syndication offerings are like investing in stocks but for real estate – you own the property and get ongoing cash flows plus unlimited share of the upside in the investments without having to get bogged down in the day to day management.
How Do You Invest In Real Estate Without The Problems Of Being A Landlord?
If you are like Jamie and hate being a landlord (or just don’t have the time to be a landlord), then maybe syndications are right for you. Until recently syndications were limited to private placements governed by the Securities and Exchange commissions. This meant that there was only a small network of people that knew about these types of investments or even had the ability and opportunity to invest in a syndication.
With the recent advent of Regulation D – 506 C and Regulation A (under Title IV of the 2012 Jobs Act), syndications have become more common place and public as these regulations allowed for public advertising. Regulation A, the “crowd-funding regulation” has birthed numerous real estates crowd funding websites. While there are many pro’s and con’s to investing via crowd funding platforms the best deals and benefits remain with the single entity private syndications.
This is great news for those who want to invest in real estate but hate being landlords. If you are considering building your own rental portfolio as a landlord check out our resources. If syndications are more your style find out more here.
And do me a favor – next time you hear from Jamie Landlord, send Jamie this article.