One of the biggest mistakes turnkey investors can make is mistaking “passive” investing for “disengaged” investing. No matter what strategy you utilize, an owner-investor has a critical role to play – and that role comes with responsibilities.
Even as you lean on the experts to optimize your portfolio, you have work to do, too!
The 7 Responsibilities of Every Passive Real Estate Investor
1. Doing your research
The responsibility of the investor, first and foremost, is to do your due diligence. That starts with doing your research! If you’re planning to invest turnkey or with any other passive strategy that employs outside providers and services, you don’t need to go running to Zillow to scope out properties. Look at turnkey providers first. Evaluate their reputation, a record of success, investor reviews, and any other information you can get. Don’t just listen to the sales pitch – ask the hard questions!
You can either find a provider you like and choose your investment markets based on the turnkey company, or you can get an idea for the markets you’d like to be in and seek out providers operating in those areas.
Regardless, do the work of checking out anyone you intend to work with. After all, this isn’t a one-time transaction – it’s an ongoing relationship built on trust and transparency!
2. Setting and testing your strategy
Even if you’ve settled on turnkey real estate investing, you should spend time learning about your strategy and all its benefits, drawbacks, procedure, and tax implications. Over time, you’ll learn the ins and outs of it all. But gaining knowledge alongside experience empowers you to ask more informed questions that will help you get to where you want to be.
3. Knowing your finances and your financial goals
Passive investors should see themselves as the captain of a ship. Their crew is made up of advisors, property managers, and all the individuals and services that get the job done day-by-day. That said, even the best crews won’t succeed without a proper heading! It’s your job as captain to chart that course. What do you want to accomplish with your investments? Do you understand your personal risk tolerance? The pace at which you're comfortable growing?
These are questions that demand answers. While you don’t have to figure it out on your own, knowing what you want out of your investments is key to your success and satisfaction.
4. Communication
As a turnkey investor, you’ll have a portfolio advisor. They’ll help you build your portfolio by identifying key opportunities that mesh with your unique goals and vision. The better your advisor knows you, the better they can meet your needs! You’re going to get monthly reports and check-ins. Don’t squander those opportunities.
Use them to build a relationship with your advisor. The better they know you, the more you can trust them to recommend the right course of action.
5. Staying tuned in to your investments
Real estate investment isn’t a “set it and forget it” venture. While you will buy-and-hold, your success isn’t solely dependent on appreciation. The cash flow you earn is a huge part of things and, thankfully, there are steps you can take to optimize your passive income. On a monthly and annual basis, be sure you’re looking over individual property and whole portfolio performance.
Doing so equips you to identify any weak links, which can then be fortified with a change of strategy or replaced by better investment opportunities.
6. Planning for growth
Your portfolio will only grow if you make it a priority. Sit down with your advisor and talk about your plans to scale and diversify. They can help you plan out a rhythm for property acquisitions based on your resources and risk tolerance. This is something that will need to be revisited and adjusted as your portfolio grows larger and your capacity increases.
7. Never stop studying
The journey of the real estate investor is that of a lifelong learner. It’s not enough to just know your strategy – you should grow well-acquainted with the broader industry. There’s something of a knowledge barrier in real estate thanks to complex procedures, legal and tax implications, jargon, and the sheer number of investment strategies available.
When you dedicate yourself to learning more about real estate, keeping up with the industry, developing financial and economic literacy, you won’t be stuck trying to connect point A to point B. The more you know, the clearer your path to success with become. Not only that, but your individual risk will decrease exponentially!
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