How much cash does it take to invest passively?
If you’re looking to place money passively into a real estate deal, it’s important to know how much you need to have budgeted for different strategies, so lets start off with the smallest buy in to the largest.
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1- Real Estate Investment Trusts (REITs)
At the smallest investment level you’ll have a real estate investment trust, or a REIT.
REITs are essentially huge portfolios of properties that you can invest in even through apps nowadays that help you get started for as little as a few hundred bucks for a private REIT.
Private REITs are actual private real estate holdings as opposed to a public REIT which is traded on the stock market.
Public REITs are not actual investment in real estate, they’re investments in stocks, so really there isn’t a pricing barrier here just like you can invest almost any amount in another stock, you can do the same here. But for this episode if you’re looking at only private investments, a REIT is your best bet to get in for the lowest dollar amount, usually you can find options for a few hundred bucks.
2 - Funds / Syndications
The next level of investment I’m going to lump in 2 types because they’ll generally have similar buy-ins, and those are private funds or syndications.
A fund is almost like a REIT but generally smaller and they’ll have higher buy ins. A syndication is pulling a lot of investors together to buy one single property. So in a fund you have some more diversity and in a syndication your investment is in one asset.
Minimum investments in these 2 tend to range from $25,000 - $50,000 on average, but each group will operate these differently. Some may have $100k as their buy in, but generally $50,000 is where most will shake out.
3 - Single Investor Projects
A single investor project is almost exactly what it sounds like, you’re looked to as the single cash investor in typically a smaller scale project. A good example of this is a SFH flip.
The reason these are generally higher is usually on a flip or some type of private money project the group is looking for one investor, so instead of a syndication style structure where many investors can chip in $25k or $50k at a time, they may look to you to fund the entire purchase and rehab amount.
These amounts will depend on the scope of work and type of property, but generally will cost more than $50k to purchase and fund an entire project.
All of these again are generalities and I’m sure there are exceptions to these rules but in my experience these are some good benchmarks you should have when exploring the different types of passive investment options you have.