by Joe Firmin 3 -Minute Read
If you start out investing in real estate as a newbie, you may be excited to dive into scrubbing moldy cabinets, exterminating bug-infested corners, painting, repainting, and installing sheetrock until your arms are weak with exhaustion.
The truth is though, the hustle and bustle of real estate is fascinating and it’s thrilling to be a part of it all. Active investing in real estate provides experience in both the finance and the construction sides of things. After a while, you may begin to feel like simplifying.
As we get older, life gets more complicated instead of less. We have kids in the house, and honestly, cleaning someone else’s mess is the last thing we look forward to. So, in continuing a mission to provide good quality housing for people, my approach has adjusted slightly to look for low effort, low-risk projects that provide cash flow so I can spend my energy with my own home and family. Livin’ the dream.
#1 - Low Effort
The investment trait that’s the most important to me these days is that the effort required for the return expected.
Parenting means you’re a master coordinator of swim class times and play dates and meal prep. This also means I barely have time to ensure my socks match, much less deal with tenant applications and maintenance requests.
When my kids are tugging at my sleeve to come play with them, I never want to have to say, “Sorry honey, I have to call a plumber for the rental property.”
Therefore, an investment opportunity must rank low on the required effort scale for the return. I say “for the return” because I want to make sure my eyes are open, that effort and return are at times linked, other times not. If an investment requires me to be on top of it everyday for 4 hours, but my return is going to be 5,000% - well, is it worth it? Tradeoff calculation.
#2 - Low Risk
Investments are like a playing piece in a giant game of Jenga. The whole thing topples over in a certain amount of time (the market cycle) and then you can re-stack the pieces and play again.
When will the Jenga blocks begin to teeter so much that they crash?
At this point, the tower is still standing, and many people like to speculate, but no one really knows how much time we have until the next market cycle will come around.
I want to position my portfolio such that I’m accounting for the possibility of that tumble. Thus, low risk is another main priority. I include in that risk profile, exit strategies – how can I get out of this investment if needed.
#3- Cash Flow
Gamblers spend hours, sometimes days at the casino hoping for the chance to hit it big. More often than not, they come home empty-handed.
In an extremely opposite manner, investing for cash flow is my game at this stage of my life. I want my investments to cashflow as-is, before improvements.
That way, if the Jenga blocks do tumble (think exit strategy), I know that the investment will stay afloat until the tower gets built again.
Appreciation is great, but I want to be able to sleep soundly, knowing that I can count on the cash flow.
I’m no professional investor, but I do have a few years’ experience and have discovered my preferences for this stage of life.
Investing passively in real estate syndications or other’s deals meet many people’s requirements of being low effort, low risk, and having positive cash flow.
I like the idea of having an experienced team in place working the renovations and following the business plan on my behalf. They do the tough stuff while I receive regular cash flow checks, tax benefits, and progress updates. Meanwhile, I have the time to play with my kids.
Passive investing wouldn’t have made sense for me as a newbie investor. I was way too excited to roll up my sleeves and get my hands dirty on a fixer-upper. But now? Trips to the park, playing The Cash Flow Game and UNO along with reading Harry Potter to my kids are much more valuable.
If you’re at the same stage of life, investing passively in real estate syndications that are low risk, low effort, and provide cash flow, allows me to have time freedom while simultaneously building wealth. It’s not a get-rich-quick strategy, but I’ll be so happy to look back and know that I made the best of my time with the kids while they’re little while also focusing on our financial future.
That’s what it’s all about, right?
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