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July 14, 2014

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I agree that there is an active engagement in learning and developing a rental property up front but after the initial there is a potentially passive time where full rental but you are really not totally passive. More of an Active/Passive relationship.

The only real passive real estate investment I know is investing in a REIT's which I had some success in.

Permalink - what is your profession? Have you found that the time an investment property requires has conflicted with your "9 to 5" gig?

JN --

I think you're referring to me. "Permalink" is simply the permanent link for the post in case you want to send it to someone. :)

I work at a mid-sized company but am able to manage my properties at off times via email and text. There would be NO WAY I could do this if I didn't have a property manager.

I have two rental properties and would consider them 95%passive at least(which I would call passive income). It does depend on the kind of rentals you have and the quality of renters and the expectations you set with them. My properties are single family so there are less people to deal with and obviously more passive than multi-unit.

Just seems like a lot of different points on an active versus passive scale. I'd say if you had a property manager then its not that different than being an active stock picker (both are all about picking the right non-diversified big assets and staying all over them)

Heck, I had one friend that, from his description, his government job salary would classify as passive income under the author's definition ;-)

I have one single-tenant commercial property with a triple net lease. It's really quite passive. A couple times a year I've had to coordinate things like insurance, tax payments, and once I've had to make a structural repair that I just bid out with my handyman. That said, I work for an investment company and our historic returns to our limited partners is in the high teens, so my take away is that the best case scenario for real estate investing (for accredited investors) is to research private equity funds/REITS and invest in a great fund that delivers solid returns.

I don't understand how you could be in touch with your property manager once a week? What is there to talk about?

I have rental property that I manage and there isn't much work other then then calling in the occasional repair or preparing for major expenses like a new roof. As far as taxes - they are a little more complicated but nothing crazy. The Seattle rental market is competitive so vacancies aren't much of an issue.

rucker --

It's always something -- even as "simple" as reviewing and getting feedback on the revenue and expenses sheets they send me every month.

In some sense, no investment is truly passive. Putting it most nonjudgmentally, if you rely blindly on someone to manage an asset for you, the odds are very good that you will end up paying more than you intended, one way or another...If it were me in your situation, FMF, I'd be going out to look at the properties, check inventory, etc., at least twice a year.

Can you do NOL carryforwards with residential real estate?

Sarah --

Yes, you can claim deductions losses in earlier years for later years. I'll be doing that in 2014.

I do plan to see the places at least once a year.

FMF...I generally don't have the inclination or temperament for being a landlord. But I will say managing that stuff rom out of state is a bit PITA. Even if you have a property manager you trust. I have a friend who did this, quasi-similar situation as yours, he moved for work...and it just didn't work out. I will say he was much less savvy than you are. I know someone else who has multiple out of state properties in several different states. But he is the type who thinks nothing of flying to the opposite coast for the weekend to check on a property, and then he goes back to work on Monday....Most people aren't like that.

I have 14 of them and a condo. My kids live in the condo and the rest of them are rented out.

Passive or Active are just words that confuse the real difference between ROI and ROIT. ROI is return on investment i.e. green money only. ROIT is the Return on Invested Time. There is NOTHING in the world other than a Buy, Hold and Pray that gives ROI. Every other kind of investment whether it is stamp/coin collection, Rental Real Estate, A Regular Job, Managing Stocks/ETFs/Mutual-Funds, Investment in Precious Metals/Diamonds or Small/Medium Business Management.

ALL of these are something that I am participating in today and have money invested in, and none of them are ROI investments not requiring my time. Hence, ALL of them are ROITs and it really comes down to Dollars Per Hour. Most of us are good at evaluating $/Hr for a job, but think that buying an apartment building or rental home will be All Greens and No Effort.

That All Green and No Effort does not exist, and even though it might work out for x months, it will change when the roof leaks, pipe bursts, employee quits or stocks take a tumble. Even the Buy, Hold and Pray investor wakes up in a time like 2008 and does not sleep. There goes the 'passivity' of the investment.

So, is there anything that is Passive.......Not Really. Now, what IRS thinks about our ventures, and how it taxes it!!!!! Well, we can ALL have opinions, but besides talking to my Senator / Congressman, there aren't much choices for the few days I spend on doing my taxes per year. Instead of worrying about the IRS rulings, I focus ALL of my efforts on $/Hour from all of my efforts.

Being a competitive person, I have learned that working longer hours than my competition, diversifying efforts, compensating my efforts learning (since I am not a smart guy)and spreading my wings into many ventures is the real road to big success. This is why at 12:29AM on a working-weekday (holding a full time job), I am sharing these thoughts with the working and retired community!

Good luck to you all. Keep the faith, and double your pursuits with all of your resources (small or big), and keep the pedal pressed to the ground. Let a few years go by and you will see the real results......That is what I teach my kids who are busy doing 2-3 internships during their summer breaks (paid or not), while their friends are going to the new movies and hanging out at the parks all day!

Kenny

I'm curious did you think of going the REIT way instead of owning the property yourself? If you did, did you decide to do both REIT and own property or not and why? FYI, we have a rental property/vacation home in FL. that flooded 6 months after we bought so personally I would go the REIT way if I was not already in.
I'm trying to look at this from all angles.
thanks

Joe

Joe --

Actually, I cashed out an REIT fund to pay for my properties.

I was looking more for income (as part of my retirement strategy) rather than total return and rental real estate beats a REIT fund on that basis.

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