Passive real estate investments are automated income streams that do not have any associated management responsibilities. One of the main differences between passive and active real estate investing is the amount of continuing effort involved to sustain the health of the investment.
This accounting expense can seem almost magical, but as assets tend to wear out over time, we can account for that reduction in value, deducting the cost of an asset over its useful life. Contrary to popular belief, depreciation does not fully eliminate the need to pay taxes… But it can delay them substantially and there are great benefits along the way.
When you are analyzing real estate investments in which you might be passively investing, you should be using these data demographic hacks to learn about the neighborhood where that property is. Bad areas can make bad investments, BUT great demographic patterns increase the likelihood of success.
CoC stands for Cash-on-Cash Return, IRR means Internal Rate of Return, and AAR is Average Annual Return. They are all various measures of how profitable an investment might be, though have their own characteristics. Understanding returns, and the different metrics that are used, helps compare different investment opportunities.
Investing in multifamily syndications has long been accepted as a stable, recession-resistant investment. Great wealth has been created with commercial real estate like apartments. On the flip side, great losses have been experienced as well. As all investments carry inherent risk, the benefits and disadvantages should be weighed and considered.