Investing in real estate is one effective way of building wealth and establishing a property portfolio moving into the future. There are two basic types – active and passive. Regardless of the type of property investing you are doing, each method requires time, knowledge and skills in order to reach your goals and maintain a stable real estate portfolio.
There are property investors who find it fulfilling to get involved in the process of finding and buying that piece of real estate they want to own. They find time to research the different markets, locate and identify the right investment, conduct due diligence on the property, make an offer and negotiate and eventually purchase the property. This is called active investing.
Active investors want to have control of the details of their investment which allows them to save money on various expenses. They have the skills and the patience to keep track of the process and those who are able to properly manage their properties have a greater chance of getting a good return on investment.
These real estate investors also rely on experts to help them reach their short-term and long-term goals. The experts they consult with or have in their team include mortgage brokers, advocates, realtors, lawyers and renovators.
On the other hand, people who are less involved in the acquisition and management of their assets are known as passive investors. But although they are not totally involved, they still have knowledge about the state of their investments.
Passive investors normally outsource the process of researching and managing properties to professionals. They still have the responsibility, though, to monitor results to make sure that their expectations are met. Investors who are renting out properties and don’t want to manage tenant issues fall into this category.
One of the disadvantages of passive investing is it reduces your return on investment (ROI) because of the cost of using service providers. As such, it is a good idea to find some time to get involved in the properties you’ve purchased. It is still the best way to understand what is happening and it will also guide you in making the right decisions.
In most cases, the investing style you choose to become depends on the type of property you are buying. Those who renting out properties normally want to be just passive investors as they want to avoid dealing with tenants and other related issues. Investors that have multiple properties also prefer to hire a property management firm to manage their assets. But if you are purchasing a family home or even a holiday home, active investing is the best way to take charge of your investment and ensure you are getting a good return on investment.
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By Wendy Chamberlain
Copyright 2018 | All Rights Reserved
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With a passion for all things real estate spanning over 20 years, Wendy loves that her role as a Buyers Agent or Sellers Advocate gives her buying and selling clients an experienced voice they can trust when it comes to negotiating to buy or sell something as important as their home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. Get in touch today via www.wendychamberlain.com.au for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner.