What Is Passive Real Estate Investing And How Does It Work?

Feb 6, 2024

5-minute read

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A beautiful classic country house, showcasing a specific architectural style.

When you hear “real estate investing,” you might think of house flippers or property owners managing rental properties for extra cash flow. If you’re interested in investing in real estate but think it sounds like a lot of work, fear not: you can also pursue a passive real estate investment strategy.

Passive real estate investing is a great way to earn extra money without the work and attention more “active” forms of investments require, like house flipping. But what exactly does “passive” mean? And how does this type of real estate investing work? Here’s what you need to know to develop your passive investment portfolio.

What Is Passive Investing?

A passive real estate investment doesn’t require extensive effort from an investor to maintain it. Investors who want to invest in real estate for passive income can look into real estate investment trusts (REITs), crowdfunding opportunities, remote ownership and real estate funds.

These types of investments allow investors to generate real estate income without physical labor or the responsibilities of a landlord. Some investments, like REITs, are similar to investing in mutual funds or the stock market and allow real estate investors to earn extra cash without buying properties.

Passive Real Estate Investments Vs. Active Real Estate Investments

A few key features differentiate passive real estate investments from “active” types of real estate investments, including:

  • The investor typically owns and manages a property with an active real estate investment. Passive investors generally won’t deal with properties in person and may never even see the real estate they invested
  • Active real estate investments have more responsibilities, including property repairs and updating lease