Danielle Robison and Flip break down active versus passive real estate investing, from private lending to fix-and-flips. They suggest testing both approaches over six months to see what works for you, and warn that even experienced investors expect to lose money on roughly 2 out of every 10 deals.
Many investors will go down the active route not realizing that they know that it's extra work, right? They know that after they get off their job, they're going to go ahead and start pursuing this. They might go to a real estate club, they might jv, which stands for joint venture with another investor. But it's still an extra job after they get done with their career, their W2 or whatever it is that you do where you earn your active income. Now you're going to go and do something else with this activity of real estate that you are pursuing. And that activity takes away from your life and your family. And people only realize that 6 months, 12 months, 1, 2, 3 years down the road, and they're like, crap, this is not what I was looking for. And now Flip's going to talk a little bit about two circles because we say actively passive and passively active sometimes. And we're going to talk about that a little bit, explain why we say that, right?
So what you want to do is just imagine two circles, but they sort of overlap just a little bit. So there's that little tiny section right there in the middle where the two circles overlap. So if you're in that little tiny section, you're actually in both circles. And so one circle would be the active investor and the other circle would be the passive investor. But that little tiny circle or the little tiny section where the two circles overlap, that's what we like to call either either actively passive investor or the passively active investor. And there's just a few things that can actually fit in that spot. Because most everything is either you are just truly passive or you are truly active. So like a truly passive is private money lender, right? A syndication and funds like, here's my money, make it work, don't call me, just give me checks, right? Then there's the active investor, you know, like fix and Flips. I don't think there's more active than that. But then like the actively passive or passively active, whichever way you want to look at it, would be sort of like turnkey real estate. Because turnkey, yes, it's. You're, you're passive because you're not buying the house, you're not rehabbing the house, you're not putting the tenant in there, but you still, once you buy the property from us, then you still monthly have the notice from the property manager and the water heater just blew up or the tenant poured cement down the toilet, you know, or whatever, you know, so you still have stuff that you have to Deal with that, you know, because most of the stuff, stuff you'll tell the property manager, just deal with it, don't tell me about it, just cover it, whatever. But there are things that you actually have to still do or the tenant decides to leave and move out of the country or whatever. Now you gotta get a new tenant and redo the house or whatever. So there are things you have to do, but it's still passive because we're the ones doing all the work. So it's weird. That's why it's that little tiny sliver. But all of the other passive stuff, they're all by itself over here. You're not having to be active for those other strategies. Same with the active side. When active it is, it's another career, you know, it's another job. But with passive side, it's not a career, it's. You're just building wealth. You're, you know, for your future and for your family's future. And so, yeah, those are my circles.
Yeah. I think what we really want to hit on is that what we've seen is many investors will go down the active route, not realizing that they know that it's extra work. Right. They know that after they get off their job, they're going to go ahead and start pursuing this. They might go to a real estate club, they might jv, which stands for joint venture with another investor, but it's still still an extra job after they get done with their career, their W2 or whatever it is that you do, where you earn your active income. Now you're going to go and do something else with this activity of real estate that you are pursuing. And that activity takes away from your life and your family. And people only realize that 6 months, 12 months, 1, 2, 3 years down the road, and they're like, crap, this is not what I was looking for. This is not what I intended. And suddenly they are now backtracking, trying to sell a property or do something different. After so much time and effort invested, so much time lost from their families, that they regret making the mistake of going down this active route because they didn't understand, hey, I can just do the passive, or maybe I can do both. And over the next six months, I can actually evaluate what have I done in six months on the active side, what, what has my money done for me in six months on the passive side? And they can actually put a decision tree benchmark right there that says, what do I want to do? Because I've just experienced six months of exploring the active and exploring the passive. And that is a much wiser way to walk into the real estate world, is understanding your options. And if you want to explore both, then do something like that as opposed to losing so much time, and for many investors, losing so much money because reality is investing in, in real estate is not easy. You will lose money. And even as much experience that Flip and I have and the team that we have and all the safeguards that we've put in place because of the mistakes that we've made and the lessons that we've learned and the processes we've put so that we don't make those mistakes again, we still lose money on deals. It's just reality. We tell our investors this is reality. It's why we do volume, because we are mitigating our risk by doing 10 deals, knowing that maybe two of them are going to lose money and the other eight are going to be fantastic. So if eight are fantastic and only two lose money, we're good. Like we're, we're in the plus side of things. So if you're not mitigating risk in that way, you have to go into this knowing, hey, I'm going to lose some money at some point in time. It's just, where, where is it? And was that time away from my family and that extra work and that extra stress worth the learning curve that it takes in real estate when experienced people like us who have been in it for 15ish years are still, are saying, we still make mistakes. So knowing and understanding that reality, because you're going to see on Facebook and you're going to see on the Internet and you're going to, you're going to hear ads of, hey, become a wholesaler, become a fix and flipper. You're going to make thousands of dollars, you're going to make millions of dollars. You're going to become, you're going to reach all of your dreams. And they don't tell you about the hard roads, they don't tell you about the lost money, they don't tell you how long it's going to take for you to get your first deal. They don't tell you any of that. And so are chasing this active real estate role when all they really could be doing is taking that money that they're investing in these courses and actually investing passively and earning money that way and then getting to enjoy life. Because that's what we all want, right?
Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on the show are not guaranteed. All investment strategies have the potential for profit or loss.
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