Welcome to today’s Didactic Minute. Today I want to give you some of the top ways to actually invest in real estate and start to build up some passive income. Many of you may be looking to become financially independent, retire early – that’s our FIRE people – made popular with Physician on FIRE and Passive Income MD and things like that which I’ll refer to later.
But if you want to start getting into real estate for different reasons – maybe there’s tax benefits, maybe you want to start building up some passive income as early as possible – there are different ways to do it other than just buying a rental house or a duplex or an apartment and trying to get into that kind of garbage because we’ve been there. It’s not always good. I’d say it’s not good more often that it is and it can be a big mess and a big headache.
So, how do we participate that in somehow? Well, the first and obvious one is called Real Estate Investment Trusts, and I say obvious because this type of thing has been around the longest and is typically the easiest to get into. So it’s like buying a stock of a real estate building or portfolios or properties, but what you’re getting with that stock is a piece of that real estate company and then they pay you out monthly income from the rents and the leases of these buildings like you’re a part owner. Now these can be publicly traded on a stock exchange or you can get privately traded ones. The publicly traded – you can often go in and out pretty easily like you’re buying and selling stocks but you’re not able to participate in the same types of tax benefits you would see in some of these other real estate investment strategies that I’ll talk about. The private ones – you got to be real careful. There are some what they call non-traded REITs, or real estate investment trusts, where you get in, you can’t get out for a few years, and the fees are really high and lots of things. So all these I’ll preface – do your due diligence. I’m not recommending any of these for any individual or for all of you.
Number two, real estate syndications. These are things you may have seen like Fundrise, Cadre; different ones like this where you can put a certain minimum down, you can invest in specific projects, you can invest in some of their funds they set aside, but what these ones do is they’re essentially what’s called the limited partnership. So, in those, you do have the growth of the project and you have income each month that you can get from the home dividends or interest or the income, but you’re also able to take advantage of some of those tax benefits you’d get from real estate like depreciation and such. Some of those, you can get in and out quickly. Some of them, you have to stick into it for a little while. But those are a little more customizable and can be interesting to some people.
Real estate funds – third way – which are also put out by these companies, are where they have diversified pools where people put some money in and they’re investing in certain projects or diversifying in between multifamily and single family and some commercial real estate as well so that diversification can be nice, but because of that, there’s an extra layer of investment management which you’re going to pay some more fees for, and again, there’s no telling how quickly you can get your money out if you wanted to and what the minimums are to invest in those.
So those are the top three ways to invest in real estate without actually becoming a landlord, and I’ve seen and been involved in all three of those. They had their pros and cons. Do your due diligence. Again, not making a specific recommendation here for any of you. But if you want to talk more about it, shoot me a message. You can comment below. Be sure to check these things out on Instagram or LinkedIn or Twitter. We’re going to be posting articles about this and some specific links. So lastly, subscribe to this on YouTube. Get the notification button hit because you’re going to see some more detailed conversations coming out later about real estate and investing and some other financial planning things for physicians.
So, again, comment below and join the Financial MD community Facebook group. We’re going to be talking more about this and I’ll post articles and lots of other things that’ll be of interest to you regarding personal finance – what we do. This is Jon from Financial MD. We’ll see you next time.