How to transition from an active to passive real estate investor. [short read]

Transitioning from active to passive real estate investing can be challenging. Here are some tips to help you do it successfully.

last updated Tuesday, December 5, 2023
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John Burson

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CONTENTS

Managing real estate investment properties can be full-time, but many investors look to transition from an active to a more hands-off approach. However, before making this change, there are several factors to consider. Here are some tips to help you transition successfully from an active to a passive real estate investor:

Minimize your tax liability.

Consult with your accountant and tax attorney to ensure you are paying what is necessary in taxes. The more taxes you save, the more capital you have to reinvest.

Have a plan.

Get multiple opinions on what you can expect to net from the sale of your existing assets and determine the rate of return you need to generate the same or better cash flow. Research the property types and strategies you intend to reinvest in to ensure realistic returns.

Reinvest capital quickly.

Once you have cash from the sale, plan how to allocate it. The longer it sits idle, the more it can impact your cash flow.

Invest in what you understand.

Stick to property types and strategies you know and have earned good returns. Research how these investments will perform in the current market conditions.

Choose the right managers/partners.

Since you won't actively manage your investments, find professionals.

 
 
 

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