When I first started investing in buy-and-hold real estate, I scaled a portfolio of over 30 single-family homes. While I had all my assets with a property manager, I was heavily involved in finding the deals, underwriting, securing lending, managing construction budgets and draws, approving tenants, and managing the property manager. The income I made was passive in the eyes of the IRS, but it was anything but passive when it came to my time.
Then I discovered passive investing and realized that I could scale my portfolio faster because I could leverage an operator’s real estate strategy and expertise, track record, ability to secure credit/lending, pool investor capital, and, most importantly, leverage their time to find, underwrite and operate the deal. This allowed me to save time, money, and energy to find amazing operators and deals, and achieve greater diversification in my portfolio than I could achieve on my own.
Finding an amazing operator who meets all the above criteria (and more!) is the first major player on your investing dream team. However, there are five other players you need on your team for successful passive investing. Get ready to take notes and build the ultimate dream team!
Identifying Who Else You Need on Your Team
When it comes to passive investing, you need a team of experts to help you make the most of your investment. Here are the key players you need on your team:
1. Strategic Advisor: A strategic advisor can help you identify your investing goals, your risk tolerance, and your investing timeline. Once that initial groundwork is set, they can provide guidance on which investments would be a good fit for your portfolio to grow your wealth. While I passionately believe that it’s important to have deep financial knowledge so you are not taken advantage of, it makes sense to pay for a financial advisor who fully understands private equity and real estate to assist with your initial portfolio setup until you get the hang of it.
2. Tax Professional: An accountant or tax professional is one of the most important players on your team. They can help you minimize your taxes (leveraging depreciation and accelerated depreciation) and maximize your profits. This individual can also help you manage your income and expenses, prepare your return, keep track of your investments, and help with any tax-related issues that may arise. It is best to source a tax professional with experience in passive real estate. Bonus points if they do proactive tax planning with you. The best time to find them is before you invest!
3. Legal Professional: As a passive investor, you should consider working with a lawyer or legal professional to help you navigate the legalities of your investment strategy. This is especially important if you want to invest in real estate, as several legal considerations must be contemplated. They can also help you review the legal documents to ensure your investment is legally sound, review your personal legal structure, advise you on the best way to structure your investment and assist with any disputes that may arise. Ideally, your legal professional should have a background in securities law. Bonus points if they work closely with a tax group as well!
4. Self-Directed IRA Provider: A self-directed IRA allows you to invest in a wider range of assets than a traditional IRA, which can give you more flexibility and opportunity for growth. And because it is self-directed, you have control over your own investments, so you can make decisions that are in line with your personal goals and risk tolerance.
When choosing a self-directed IRA provider, there are a few things to keep in mind. First, make sure they offer the type of account that best suits your needs. There are traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and more. Each has its own set of rules and regulations, so it is important to choose the right one for your situation. Second, look for a provider with low fees. Some providers charge annual fees, while others charge per-transaction fees. The best providers will have low or no fees, so you can keep more of your money working for you. Finally, make sure the provider offers exemplary customer service. You should be able to get answers to your questions quickly and easily.
Where To Find These Professionals?
There are a few different ways that you can go about finding the professionals that you need for your passive investing team. The first option is to ask around for recommendations from other investors who have experience with passive real estate investing. Another option is asking operators who they like to use (just make sure to understand if they get a referral fee or not). Finally, you can always contact a local real estate investment club or networking group for potential referrals. Whichever route you decide to take, make sure that you take the time to interview multiple candidates before making your final decision.
How To Vet and Choose the Right Team Members
Once you find some potential candidates, here are some tips on how to vet and choose the right team members:
1. Do your research. When looking for experts to add to your team, do a quick web search and make sure they have the proper credentials and experience in passive investing, and that they are respected in the industry (i.e., good customer reviews).
2. Ask for referrals. Talk to other passive investors and see who they recommend. Contact their recommendations and ask them about their services.
3. Interview multiple candidates. Once you have narrowed down your list of potential experts, be sure to interview multiple candidates before making your final decision. This will help you get a better sense of who they are and what they can offer you as part of your team.
4. Make sure they are a good fit. In addition to being qualified, the expert you choose must be a good fit for your personality and investing style. Be sure you feel comfortable working with them before making any final decisions.
Wrapping Up
As a passive investor, you will need to team up with the right professionals to ensure your success. As you can see, successful passive investing requires the right team of players. Having a financial planner, tax professional, lawyer, and other professionals by your side will help ensure that you make smart decisions with your investments and maximize returns. With these five players on your team, you will be well-positioned for success when it comes to passive investing!
