Investing is an essential tool for individuals seeking to build wealth, achieve financial goals, and secure their future. Within the realm of investing, two primary approaches have emerged: active investing and passive investing. Understanding the key differences between these two strategies is crucial for investors to make informed decisions aligned with their investment objectives, risk tolerance, and time commitment. In this blog post, we will explore the fundamental disparities between active and passive investing, shedding light on the distinct approaches, benefits, and considerations associated with each.
Active investing occurs when the investor is hands-on. These investors research and identify properties that meet their objectives, and negotiate a deal with the seller. Once the deal is made, the active investor may handle management of the property as well. This could include marketing the property, handling rent payments, repairs, screening tenants, and even drawing and executing the lease.
Passive investing happens when an investor provides capital to an investment but a third-party does the majority of the work. Passive investors tend to analyze offering memos, and review regular financial and performance reports. Passive investing can be the perfect match for investors who want the benefits of owning real estate without having to manage, or own, the property.