How to Evaluate a Passive Investment

All Passive Real Estate Investments are not equal

The challenge with wanting to be a passive investor is that you have to make sure that you do your

due diligence when selecting an investment.

Some people are just as happy to write a check and wait for the project

to be completed or for the

investment to mature.

If an investment is close to you and something goes wrong,

you can always go visit the property

The disadvantages of investing close by is that

there may not be as many opportunities for you in your

own local market.

“If you invest with someone you trust and you are happy being totally passive, then location should not be an

issue for you.”

You want to make sure that you are investing with people who have experience in the

type of project you are investing in.

Relationships have gone bad as a result of failed projects

from an inexperienced friend or family member.

When trying to determined the amount of experience people have, you want to look at years of experience, how many projects of this type have they successfully completed and references they can provide.

Most first time fix and flip investments fail because people:● Underestimate the cost of the materials● Underestimate the amount of work to be done● Underestimate the amount of time it takes to do

work and to sell the property● Overestimate the selling price of the finished

product

When looking for someone to invest with, make sure this is not their first

project of this type and that they have a proven track record that shows success

at this type of investment.

“Some people want to be 100% owner of the property when they get into a joint venture and they want a remain 100% owner for

the life of the project.”

To become 100% owner of a property the property must be purchased with

all cash or with the help of a mortgage. This means you would have to get qualified by a lender to be able to

obtain a mortgage.

One way to invest in Real Estate is by just providing your cash

and staying off the title of the property

In that case, your property must be secured through the use of a mortgage charge against the

investment property.

Your choice of real estate investment strategy should depend on what excites you

or what interests you.

“Each real estate investment strategy brings with it

different types of risk and different degrees of risk.”

Buy, rent and hold is a simply buying a rental property and

renting it out and holding onto it.

You might choose buy, rent and hold investing

because you are familiar with this business mode.

Rentals properties have been around a long time and there are a lot of regulations around rentals.

You may chose property development investing because you like the thought

of building something and contributing to the community.

Development comes with it’s own set of risks and rewards. Make sure you choose an experienced developer.

Development comes with it’s own set of risks and rewards

Fix and flip strategy is where you buy a property, fix it up and sell it at a higher price that will cover all

your costs and make a profit.

A mortgage investment is where you lend money to an owner

at a fixed rate of return. It’s like you are acting as a bank.

A syndicated mortgage is where a group of people and/or corporations pool their

money together and loan it to an individual or corporation, usually for the purpose of funding the initial phase of a

larger development project.

A Real Estate Investment Trust is a trust set up to invest in

real estate for the purposes of making money.

A Real Estate Investment Trust will own several properties and the money earned on

these investments is used to pay the investors.

A Mortgage Investment Corporation is an organization set up to lend money

to individuals or corporations for the purpose of purchasing real estate

Mortgage Investment Corporation earns money

through payments made by the borrowers and in turn uses this

money to pay its investors.

Check out my book for a Step by Step approach on how you can get started in Real

Estate Investing.

Real Estate Investing: The 7 Step Solution to Making Millions in Real Estate

Jim Pellerin has been investing in real estate for over 25 years. He is the

author of Real Estate Investing: The 7 Step Solution to Making Millions in Real Estate

Check out his blog at jimpellerin.com