Lazy Real Estate Investing Options

I have been thinking about real estate investing for years. I’ve been to a lot of free trades (from those that sell syndications, to those that sell private funds, and those that sell oil and gas investments), and after stuffing myself with chicken piccata short ribs and barbecue, the temptation to expand into this category of goods sounds like such a good idea.

And it can be.

WCI founder Dr. Jim Dahle has had great commercial success. WCI writer Margaret Curtis has no regrets about her direct investment (even though her employer was almost immediately arrested on a drug charge). And others in the WCI community have found this asset class, whether through short-term leases or trades, to be a profitable venture.

But something (perhaps due to risk or the often high micro-investment or good old inertia) prevented me from cold-plunging into real estate.

As I’ve gotten older, I often wonder if I’m doing a better job of setting boundaries about not engaging in aspects of life that I don’t enjoy. Or maybe I’m getting lazy.

If it’s the latter, I wanted to create a scale of how a lazy person can invest in real estate and be satisfied with the result (from an income perspective and from an I-just-want-to-sit-on-the-couch-all-day perspective). If, like me, you want to finally invest in real estate but don’t want to put a lot of time and energy into the project, this is where you can turn.

Lazily Planting Buildings

For a visual representation of how much work goes into the different segments of real estate, here’s our ongoing real estate chart that compares the complexity, diversity, knowledge required, and tax benefits of different asset class locations.

Let’s go through some highlights and rate them on my Lazy House scale (1 being I ain’t-gettin’-I ain’t-gettin’-out-of-bed-today and 5 being the hardest worker, most very much person you can imagine).

Short Term Rentals, Long Term Rentals, and Fix and Flip

As a lazy real estate investor, I avoid all these options. I’ve tried hard to improve my skills, but I’m not a handyman (I consider it a personal victory when I can handle basic plumbing and electrical tasks), so flipping houses isn’t easy.

Short-term rentals may be fine if you have a lot of extra time or if you have a partner interested in getting Real Estate Professional Status (REPS), but you’d be better off in the hospitality business and/or don’t care what your Airbnb-hating neighbors think of you.

For several years, we rented a townhouse we had bought while my wife was staying for five years, and it worked well as a long-term rental. Most of the time we had a cash flow gauge, but we built equity in our home, had 3-4 good tenants over the years, and didn’t get many calls about the dishwasher or refrigerator not working properly. I didn’t like living 1,100 kilometers away from that responsibility, and I felt that the house was a constant albatross around my neck. I was relieved when we sold it, and vowed never to own the property again.

I think you can put a little effort into this area if you delegate all the work to the property manager, but you will be reducing your profit. If you want to work in real estate, this is where you should invest your time and money. If you want to do nothing, you must take a pass.

Lazy Real Estate Scale: 5

Symptoms

For several years, I loved the idea of ​​product integration. I even went through The Hands-Off Investor which is pretty dense. Referrals are a classic case of take-my-money-now-so-you-can-pay-me-more-later.

But here is what gives me an opportunity.

1. You should do a lot of due diligence before you start your investment, and if you don’t know how to do that with due diligence, you need to spend time 1) reading and learning how to do it or 2) failing, losing money, and then learning how to do it. That all sounds like work to me.
2. Say you have $100,000 to invest in real estate, and you find a reputable company that requires a minimum of $100,000. That company invests your $100,000 in one apartment building. You end up with a piece of your nest egg in a legacy category that lacks any kind of diversity. If that apartment building fails, you’re out $100,000. I would like more variety than that.
3. Even if the investment works well, you probably won’t be able to control your money for several years. This is the wrong way of real estate.

If you want to be lazy, sydications are a solid option, but you will have to do a lot of work in the investment lead.

Lazy Real Estate Scale: 3

Private funds

Giving someone money to pay me back more later seems like a good idea. Funds can be a good option. Similar to sales, you will probably need to be an accredited investor (or be a qualified investor or qualified buyer, the top two bars to be removed) to participate in this type of real estate investment, but investing in a private fund (which will have multiple properties) offers more diversity than individual sales.

You’ll still need to complete your due diligence before you invest, but private equity funds have a lower correlation to the stock market and often offer better returns.

From a how-much-work-do-I-really-want-to-put-in perspective, here’s what might stress you out: a large number of K-1 forms will force you to pay more money to an accountant to file your taxes, that will force you to file in more states, and that will likely force you to apply for an extension. I’m stressed enough about making sure my taxes are due by mid-April. Do I want to extend that stress for another six months every year?

Lazy Real Estate Scale: 3

Turnkeys

If you want to pay someone else to do all the work for you while enjoying the benefits of outright ownership, the turnkey model, which allows you to buy a property that already has a tenant and a team already assembled to maintain the property, is great. As we have written before, here are the advantages of turnkey real estate investments:

• It is mainly a manual investment.
• You have full control of the area.
• You can plant anywhere.

Disadvantages include paying a large amount of money upfront (you’re buying a house, after all) and not being able to get a divorce or bankruptcy. But all of that can be offset by the lack of work you need to do to make this investment.

Lazy Real Estate Scale: 2

Public REITS

Now, this seems simple. If you’re looking for a steady stream of income, portfolio diversification, and long-term capital appreciation, public REITS are a good idea. But the public REIT’s correlation to the stock market is very high, and it is not very tax efficient. Also, you wouldn’t benefit from depreciation or a 1031 exchange like you would from other types of real estate.

The liquidity of ETF trading, diversification, and the lack of K-1s, however, make REITs tempting for someone who can’t seem to find a way out of the BarcaLounger.

Lazy Real Estate Scale: 1

So, what’s next for me and laziness? Will I finally shake off inertia and invest in a new asset class, or will I continue with my current asset allocation and make room in my mind for other activities? I’ll get to it later, when I’m done with my current Netflix binge.

More info here:

How to Start Investing in Real Estate

The 7 Worst Ways to Invest in Real Estate