Hands-On Vs. Hands-Off
Approaches to Investing
When diving into the world of investment, you’re faced with several decisions.
What kind of investment do I want to get involved in?
How much am I comfortable investing?
How involved do I want to be?
We’re taking a closer look at the different approaches you can take when it comes to the way you choose to be involved in your investment, specifically that of real estate investment.
Hands-On Approach
Let’s say you choose to purchase an existing apartment complex with the intent of having a hands-on approach, you’re going to be personally active in ensuring that the property value increases over time. This most commonly will come from renovating and upgrading empty units between tenants, allowing you to charge a higher rent to the next tenant. After a few years, you may decide to sell your property. Not only have you seen sustained and increasing income due to the rising rent for incoming tenants, but you have also greatly increased its value over time, allowing you to likely sell it for substantially higher than your purchase price.
Hands-Off Approach
If you are looking to enjoy the benefits of real estate investment without having to be actively involved, you will likely take the hands-off, or passive, approach. One way to do this would be through Real Estate Investment Trusts (REIT’s), which are essentially companies that hold a portfolio of properties across multiple markets and pool investors’ capital together to purchase large real estate deals. There are also private placement offerings or “real estate syndications” which is a structure in which you pool your capital together with other investors in an equity or debt-based investment. In this instance, you are investing directly into the property, giving you direct ownership.
At the end of the day, neither approach is better than the other, it all comes down to what you’re most comfortable with and what is most conducive to your lifestyle!