If you start out investing as a “newbie,” you may be excited to dive into scrubbing dirty cabinets, spraying for bugs, painting, repainting, and installing sheetrock until your arms are tired. (If you were ever in the military, it sounds like “field day’ing” the barracks on steroids, lol.)
The truth is, the busywork of real estate is really interesting, and can be a rush to be a part of. Investing in real estate provides experience in both the finance and construction side of things. But after a while, you may begin to feel like you need a simpler option.
As we get older, life tends to become more complicated instead of less so. We have kids in the house (or preparing to leave it), and honestly, between work, a spouse, children, school and/or college plans, and perhaps aging parents, life can become quite a juggling act. So, in an effort to continue providing quality housing for people, my approach has adjusted slightly over the years.
Quite simply, I and most people I know want low-effort, low-risk projects that provide cash flow so we can focus our energy on our own homes and families.
#1 — Low Effort
The investment trait that’s the most important to most of my friends these days is that the effort required from their end is low.
For me personally, balancing my work, my local and long-distance family, a mother battling dementia, and my investments makes me a circus-quality master juggler. It also means I barely have time to take daily showers (I know…eww…), much less deal with tenant applications and maintenance requests.
I’ve heard of tenants on the verge of eviction purposely clogging sinks and leaving water running to damage not just their own unit, but two or three. And I’ve personally had angry tenants throw burning garbage through a leasing office window because they were angry they were getting evicted for not paying
When my daughter wants to talk or my wife wants to spend time with me, I never want to have to say, “Sorry, I have insurance paperwork to do.”
Therefore, an investment opportunity usually has to rank low on the required
#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. Some say it may be on “life support.” Many people like to speculate, but no one ever knows how much time we have until the market cycle will turn again.
I’ve been through multiple market cycles (the one that ended in 2008 was a huge learning experience with my single-family home investments), and I want to position my portfolio so I’m accounting for the possibility of that tumble. So low-risk is another main priority for me.
#3 — Cash Flow
Gamblers can spend hours and even days at the casino hoping for the chance to hit it big. More often than not, they go home empty-handed.
On the complete opposite end of the spectrum, my game is investing for reliable cash flow. I want my investments to cash flow at purchase, before improvements. That way, if the Jenga blocks do tumble, I know the investment will be able to stay afloat until the tower gets built again.
Appreciation is great (and can be where the big money is made), but I want to be able to sleep soundly knowing I can count on the cash flow, first and foremost.
Related article: Active vs. Passive Real Estate Investing — Which is the Best Fit
I’m no Warren Buffett, but I do have a few years’ experience and have discovered my preferences for this stage of life, and the preference of a lot of people like me.
Investing passively in real estate syndications has met our requirements of being low-effort, low-risk, and having positive cash flow.
I know most people like the idea of having an experienced team in place working the renovations and following the business plan on our behalf. They do the tough stuff while we receive regular cash flow checks, tax benefits, and progress updates. Meanwhile, we have more time to spend with our families. Unless of course, we make the conscious choice to be on the active/sponsor side of things, where the profits can be greater, but so is the work and responsibility. Frankly, the reason I can do that is largely because we’re empty nesters now.
Passive investing wouldn’t have made sense for me or many like me as newbies. Personally, I was way too excited to roll up my sleeves and get my hands dirty on a fixer-upper, when my responsibilities in the Marine Corps allowed me to do that. But now? Well, Taco Tuesday with the family is much more valuable to most
people I know.
At this stage of life, investing passively in real estate syndications that are low-risk, low-effort, and that cash flow allows people like me to have time freedom while simultaneously building wealth. It’s not a get-rich-quick strategy, but if followed routinely, it is a great strategy to build wealth steadily.
And more importantly, my friends with younger kids will be so happy to look back and know they made the best of their time while their kids were young, while also focusing on their financial future. They’re playing the game in a way that works
And isn’t that what it’s all about?
Further reading: How to Stop Trading Your Time for Money by Creating