Real Estate is a multifaceted investment opportunity. There are two categories of investors, those active in the day-to-day routines of business or those investors who prefer to be passive, allowing others to worry about all of the details on their behalf. Once you’ve decided which investment path better suits you, you can then diverge into areas of interest that suit your investment style.
If you are just getting started, it helps to examine your imagined roles against the reality of what each will demand. Before you decide which path to follow, you may want to try both shoes to see a better fit for you, passive or active real estate investing. Both options can be financially rewarding. It all depends on your lifestyle, goals, and time commitment. We’ll examine five of the main differences between active and passive Richmond real estate investments
Active investors like house-flippers or those who fulfill the role of landlord for their properties spend their time conducting the business of managing the investments. These duties include locating, negotiating, handling all of the paperwork, and meeting deadlines for new property purchases. Additionally, an active investor may choose to conduct their accounting. If you are a people person, you may enjoy a landlord’s duties, which requires relationship skills. Some active investors even take on the repairs and maintenance of their holdings. Without hiring professionals like those at RVA Home Buyers, running every aspect of the business yourself will necessarily limit your holdings to a manageable number.
Active and passive Richmond real estate investments differ in that passive investors are hands-off investors. Passive investors work with a team of professionals like those at RVA Home Buyers who oversee every aspect of their real estate investments on their behalf. In this way, passive investors can expand into a variety of investment possibilities in real estate, which would have been impossible to manage independently.
Active and passive Richmond real estate investments vary widely because for active investors, owning and maintaining properties includes unforeseen outlays of cash for emergencies and necessary repairs. It is also more costly to research and locate their investments, and the expenses of transactions typically being much higher.
On the other hand, passive investors make an initial investment and make no further outlays of money. Because of their ability to hold multiple assets among different market sectors, their passive income stream has a more considerable overall potential for growth.
There is a considerable difference in having a say in what happens between active and passive Richmond real estate investments for the active investors.
Passive investors diverge from the level of control seen by active investors because others manage their investments. They may have assets that they may not own themselves and have little to no say in how they are purchased, operated, or dispersed.
While the potential profits between active and passive Richmond real estate investments vary little, the distribution of the profits does vary. Active investors will typically realize all of the profits from the exit of the investment, being the only owner.
However, passive investors are among many investors and will be splitting the profits proportionate to their ownership. The portioning doesn’t mean that the profits are necessarily any less than that of an active investor.
Active investors take on greater risk. Not for the inexperienced, unless you are incredibly knowledgeable, you should begin your journey with an agent like those at RVA Home Buyers to teach you the ropes. Having total control means ultimately being financially responsible for whatever may go wrong. Legal battles can devour not only the property but could drain you of your other assets as well. Active investors tend to specialize in one sector of their market, which lowers diversification and increases risk.
While Passive investors share some level of risk, this is one of the significant differences between active and passive Richmond real estate investments. What you have at stake is the capital that you have invested. Working with an expert like those from RVA Home Buyers can help you to significantly lower these risks by avoiding errors that appear as glaring red flags to an experienced eye. Again, diversification comes into play for passive investors by spreading risk among many sectors of the market.
Working with a professional at RVA Home Buyers to manage your real estate activities means working with a vast team of professionals from every walk of the real estate industry. The professionals at RVA Home Buyers will take the time to listen to your vision for managing your Richmond real estate investments. At RVA Home Buyers, we’re happy to answer any questions or concerns you have with no obligation. Our goal at RVA Home Buyers is to help you determine which investing style is right for you, active or passive, and then to help you succeed! Give RVA Home Buyers a call today, with no obligation, at (804) 420-8515 or send us a message at any time.