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Why Invest Passively in Multifamily Real Estate

I recently read a Forbes article comparing single family rental investing to passive investing alongside a professional in commercial real estate. It’s always an interesting comparison and I encourage you to read the full article here. Below are the top five reasons listed in the article and my input on what they mean when passively invest alongside a professional.

  1. Asset value correlated to net operating income (NOI): net operating income valuation allows the owner to control what the property is worth by either increasing or decreasing the NOI. Having a business plan geared towards increasing income gives another level of professional control and proven methods to achieve income growth.
  2. Ability to co-invest with professionals: Inexperienced investors can passive invest with professional who have real estate experience which gives investors the ability to go further faster with proven strategies and models to increase income and decrease risk.
  3. Diversification: By passively investing, investors have control to work with others and review invest opportunities in markets they want to invest in.
  4. Loss limitations: Passive investors only put up their initial capital and are not liable for signing on the debt note.
  5. Rationality: Market competition keeps the investment fundamentals in check which any solid professional can monitor and socialize with passive investors throughout the investment hold period to ensure performance goals are achieved.

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