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Real Estate 101
What type of real estate investor am I?
What type of real estate investor am I?

Passive and direct investors defined

Jesse avatar
Written by Jesse
Updated over a week ago

It’s always best to know what you own and how you own it. Regardless of whether you are a direct investor in CRE, e.g., purchasing a McDonald’s on Main St., or you are a passive investor in a real estate group, online platform, or real estate investment trust (REIT), it’s imperative that you understand the ownership interest you are purchasing.

Direct investors typically own a specific property in whole or in part. Generally speaking, direct investment costs thousands of dollars to get started and requires some hands-on management, but comes with the benefits of property ownership, including:

  1. Capital Appreciation

  2. Tax Benefits

  3. Portfolio Diversification

Direct investors have the power to build, renovate, or fix almost anything they desire on their property. Think of all the possibilities: you could build a space elevator directly above your property or a waterslide down to fire town.

Passive investors, on the other hand, have some money to invest in real estate but don’t necessarily have the time, or desire, to manage the day-to-day affairs. These investors seek the income, safety, and growth potential of real estate without the headaches. For that reason, and many others, passive investors often choose investment professionals to take the lead.

Some of the most common passive investment opportunities are real estate investment trusts (REITs), private equity, and real estate mutual funds. Passive investing is a great way to get started investing in real estate with little money.

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