Your nest egg unfortunately doesn’t build itself.
Saving and scrimping only gets you so far. Wealthy people leverage their money to create passive income, then do it again and again to create a snowball effect.
But where does that initial money come from?
There are a lot of different places to find investment funds – below are 4 of the most common.
Option 1: Individual Investor
Do you want a quick and easy way to invest?
Do you want to invest with free cash that otherwise sits in a savings or CD or money market earning way less than it could?
If you answered yes, becoming an individual investor may be the best option for you!
Individual investors can:
- Move in and out of deals quickly, rolling their returns into the next deal to speed up that most powerful of financial forces – compounding.
- Receive distributions directly into your account
- Reap many of the tax benefits of owning real estate (depreciation is amazing!)
- Take advantage of all the benefits, tax breaks, and distributions that come with being a real estate individual investor – without all the pesky property maintenance and paperwork.
Option 2: Joint Investor
Do you and a partner (spouse, family, friend, etc) have enough between you to invest?
Do you still want access to all the awesome benefits of passive real estate investing?
Joint investing may be for you. It is more common than you think!
Joint Investors can:
- Get all the same benefits of Individual investors
- Leverage each other’s financial position to get into more lucrative investments than they could alone
- Have a partner to talk through deals with that you know is acting in the best interest of the investment.
With Joint Investing, asset protection strategies are highly encouraged. Put legal beneficiary designations in place and written out plans to keep your investments protected.
Then start enjoying all the same benefits individual investors do – but as part of a team!
Option 3: 401K Real Estate Investing
Do you have a 401k or Roth IRA?
Are you frustrated with its performance and wish you had more control/options?
Surprise – You can use your retirement funds to invest in real estate!
With a self-directed IRA, you can:
- Invest in commercial real estate passively – on deals YOU chose, with partners YOU know. Not stock bundles a company picked out.
- Diversify your retirement into a fantastic asset class, without coming up with free cash elsewhere
- Learn more about how real estate passive investing works by getting into deals with experienced operators
If you invest $100,000 passively in real estate with a five-year hold and a projected 2x EM, you may double your investment over that five years. Then do it again, and again!
Keep that compounding rolling through into retirement age.
Transforming a 401k into a self-directed IRA is a very common and effective way to add real estate investing to a portfolio. Even if you are still at the company, you can use funds you personally contributed (not the company match).
This is a great way to help your nest egg grow faster even while working full-time.
Option 4: Bring the Asset
Do you have a piece of land, 2nd home no one really uses, or other property asset other than your primary home?
Are you unsure of the best way to leverage that property into cash for your family or business?
Do you not have the cash or knowledge to get the property to its highest and best use?
Bringing the Asset Option may be for you!
If you Bring the Asset, you can:
- Decide who you partner with
- Gain access to partners with experience you can learn from
- Stay passive or go active depending on your level of interest
- Still get great benefits from RE investing!
This is great for people who inherited real property of some kind but are not in the real estate business. Not all property is worth developing or improving on. However, there are many cases of “you don’t know unless you ask” – and if you move to sell without the right knowledge first you could be walking away from a great opportunity for passive income!
Hopefully this gave you some ideas on how to get started passively investing. Consider your family situation and personal financial goals, then pick the right option (or options!) for you.
Want to use real estate to build your own luck, but need more time/money/education?
We’re here to help.
You can start making an impact sooner than you think.
Join Club Clover and start building your own luck today!