BPI Episode #2: Active vs. Passive: Choosing Your Path to Real Estate Wealth

Welcome to Building Passive Income, the podcast for professionals, entrepreneurs and investors who want to build wealth, diversify beyond Wall street, and create financial freedom through passive commercial real estate investing. Your host is Wayne Courageous iii, a seasoned investor and founder of CREI Partners, a leading commercial real estate investment company. He spent nearly two decades navigating and educating others on the commercial real estate, from multifamily to storage to retail. Each episode is under 15 minutes, intentionally short, easy to understand, and packed with insights that help you grow your income and protect your capital without becoming a landlord or sacrificing your time. If you're ready to learn fast and invest smarter, you're in the right place. Let's get started.

Welcome back. I'm Wayne Courageous iii, host of Building Passive Income podcast. Today we're going to talk about what is passive investing and why do people do it. Think about passive investing as investing in a stock market. Say you're investing in a stock. That business that you are investing in is not run by you, it's run by their staff, their leadership. And so you're sitting back and you're seeing the ups and downs that are happening based on stock prices, et cetera. The great thing about real estate investing is you don't really have the ups and downs, the major swings of the stock market because it's a pretty stable physical asset. You don't have to worry about what's going on overseas or what's going on here geopolitically, or, you know, what's going on, you know, with a Facebook post or a tweet. At the end of the day, it's very local to, to that location. So from a passive investing standpoint, you're investing in a alternative investment, saying commercial real estate, and you're not having to do any, any of the legwork. I had mentioned on the first podcast where I was an owner of a two bed, one bath. Well, that two bed, one bath took a lot of work, despite even having a friend living in there. And a lot of people don't want to be dealing with tenants, termites, toilet issues, because a lot of those calls happen at 2, 3 in the morning. And you know, our investors and the people that we talk to mostly are people who are wanting to do what they love, whether it's their career, it's their hobbies. They want to invest, they want to diversify, they want to get benefits of own real estate, but they don't want to do any of the work. So from a passive side, those that are interested in investing in real estate, but not Wanting to do any of the work. A lot of that work that they will do and we'll talk through this is done up front. It's evaluating deals, evaluating deal sponsors, et cetera. But once that deal goes live or closes, they're completely passive. They're getting passive income, they're getting updates, they're able to enjoy what they want to without the hassles. And oh, by the way, they're enjoying not only the income that's coming through it, but the depreciation that comes through it as well. From a tax benefit standpoint where passive losses through depreciation offset passive income, we'll dive into that more as well. So how do you choose if you're a passive or active investor? Well, if you're a passive investor, you're not wanting to do the day to day ins and outs of real estate, of managing say a property manager or going and collecting that rent payment from a tenant, or dealing with a contractor to do any renovations. It doesn't really matter what scale. Maybe it's a small single, you know, two bed, one bath that I had when I first started or 127 unit that we have today as an example. So those people that are not wanting to be in the day to day, they want to be more passive again as I just stated, same benefits, less risk because they're limited to the investment that they put in as from a loss standpoint because there's always risk. Whereas active investors, and we'll talk about this on our next episode, have more risk, have more of the day to day decision making as well. So however, there are people out there that just enjoy control. They like to know that their money is being put somewhere and they have control over the success and they want to be the ones who get that call or make those decisions. And that's okay. That's sort of where I sit and what I enjoy. I mean my whole life has been in commercial real estate and enjoying and not really knowing anything different on than operating real estate. Right. I don't come from another industry and trying to figure this out. Like this is all I know. So for me, like of course I'm going to be an active investor because this is what I love and what I enjoy doing. So when you're evaluating where you want to be in real estate because you know you want to diversify. So you have a stock market account or 401k and you're like, hey, I want to diversify. Well, real estate is a natural choice, right? Because a lot of people as you know, do really well in real estate. When you've made that decision though, it's then a decision of do you want to be a passive investor or, or an active investor. And ultimately there's no right or wrong decision. It's really up to you on what you are most comfortable with and what you really want to do with your time. So if you are looking at doing more passive investments, like this is what this podcast is about. It's about educating and knowing, you know, what to look for, what to ask questions. And so that's what we'll really dive in here. Right? If you're looking for active investments, there's a lot of podcasts and a lot of books about active investing, how to find a deal, how to negotiate, how to operate and you know, build teams to do that. So, so we'll talk a little bit more on our next podcast about active investing. But on the passive side, I just feel like those that are ready to take the next step and ready to continue learning about the joys of real estate on a passive side, you're in the right place. I also would highly recommend going to our passive investor coaching.com program where it's free and it's a lot of content broken up in video modules of how to analyz a deal. Of course it's going to talk about CRI partners and how we came about and who we are and what type of deal flow we do, but it's going to talk heavily about how to vet a sponsor, how to look at a deal. Say you're in Charlotte, North Carolina and you're looking to invest in San Antonio, Texas. Like instead of making that flight over, you know, you're going to be doing all the heavy lifting up front and, and then once you, you know, go in and make your decision, you sign paperwork, et cetera, then at that point you become that passive investor. So really the purpose of this episode is start thinking about, okay, you're ready to diversify in real what's next? And really what's next. Determine if you are an active investor or a passive investor. Obviously, if you're an active investor, you're more than welcome to listen to our podcast and listen and understand what we're doing on this side of the real estate investing realm. But if you're a passive investor, just keep at it. Keep listening to these podcasts. They're not going to be long and it's on purpose. You know, there's supposed to be bite size podcasts where you take the information, you have your aha, moment and you're going to the next step. So today's Aha Moment Determine if you are an active investor or a passive investor. Maybe it's both, but either way, you want to determine what is best for you and go from there.

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