7 Reasons Income Investors Need To Trade Active For Passive Investment Options
Smart investors are increasingly graduating from active hands-on investing to passive investment options managed by partnerships, syndications, and funds.
This is a critical transition. One that is essential for financial wellness, growing and protecting wealth, and the ability to retire.
It is also a shift that many fail to make expediently. A mistake that can throw investors back decades in their financial progress.
Why is it so vital?
1. The Best Investments Are The Most Businesslike
At least this is what Warren Buffett says, and he seems to understand a thing or two about investing.
If you are too close to your investments, most people find it almost impossible to be truly objective and disciplined. Either they treat it as a part time hobby, or allow their emotions to drive knee jerk decisions that result in substantial long-term consequences.
2. Buying And Selling Assets
It’s important to focus on the hard data. To invest and transact by the numbers, not your likes and dislikes of the moment.
If you buy a property in your favorite vacation destination, or because you love the design, you’ll overpay, and won’t bring yourself to sell and exit on time.
In the reverse, you’ll ignore assets that can be far more profitable.
Being more passive enables you to dial in for your long term goals, and avoid expensive emotional transactions.
3. Timing The Market
Active investors rely heavily on trying to time the market. Most investors are terrible at timing the market. They buy too late, and sell too late.
4. Staying On Top Of It All
Sound passive investment vehicles bring together teams of experts with decades of experience. They have the technology and labor power to stay on top of ever changing landlord tenant laws, tax rules, and federal, state, and local regulations, as well as shifts in market trends. This is more than a full time job for several people. Overlooking just one new change in the law can be obscenely expensive.
5. Truly Passive Income
Active investors, including those operating their own rental properties as landlords never really achieve generating passive income. They just hire themselves for an extremely poorly paying job, with no time off or vacations.
6. Liability
All the above could be deemed nice to haves. Yet, the number one reason smart investors switch to passive investments managed by a third party is the liability. Making a million dollars is easy. Keeping it is a completely different game altogether.
Active investors rarely see all the risks and liabilities. It’s what you don’t know that gets you. Even when they see the risks, they often don’t have the self control to hold back, or grossly underestimate the losses they are facing.
Without the right structure, one wrong notice, email, date, or sentence can not only cost them their whole portfolio, but their own homes and personal assets and future income too.
7. Managing Contractors
Asset management is one of the most pivotal parts of financial success. It is only in the execution that opportunities are fully realized, or broken.
For real estate investors, a huge part of this is dealing with contractors and various vendors. They will make or break you. This is especially true when investing out of area. Sadly, today’s technology has only made it easier for contractors and criminals to defraud investors. The odds of you being ripped off feel close to 99%. Perhaps you can afford to lose $25 or $250k you thought was going into improvements to your assets. Most then can’t afford to invest the same again to get the work done. Then find they are upside down on their debt, and are no longer even able to sell off those assets.
