A passive investor is not active in the day to day real estate business. I used to think I was a passive investor with over 200 homes, only to have someone point out that I was really in business. And there is a big difference from being a passive investor, being in a business and running a business.
I was a bit surprised that for 30+ years I was running a business and it couldn’t run without me. Heck, I was really just an employee that worked tirelessly everyday to acquire more houses.
Things are different now. I still buy houses but I hire a manager to handle all the tenants. That’s the beautiful thing about real estate as you can basically hire someone to do every aspect of the business.
- Someone to find the opportunities
- Someone to fix the house
- Someone to manage
- Someone to sell it
The greatest aspect of real estate is that everything is negotiable. When you surround yourself with the right talent you can truly reap in the rewards of passive real estate investments. I know of no other investment that has so many moving parts and there are so many ways to make money. It’s no wonder that more and more people are getting involved, especially with their retirement accounts using their self-directed IRAs or self-directed 401(k)s.
The government allows you to invest these retirement plans in real estate but you cannot manage it nor should you do the work on the houses. When you consider that 91% of the wealth created in the United States is from real estate then you want to know the people that can make this happen for you.
The best thing about using retirement accounts to invest in real estate is that your money compounds tax free. All the money you make within your retirement account is tax free and in the case of a Roth IRA or Roth 401(k) – there is no tax on distribution.
The savvy investors are buying their properties for cash and using their retirement accounts. Are you?