“If you don’t find a way to make money while you sleep, you will work until you die.” —Warren Buffett
Passive investing is a topic I am very passionate about.
I could talk about it all day and night, and sometimes I even have!
I talk with investors almost every day about what it looks like to invest in a passive deal. In the process of raising over $15 million for passive deals, I’ve talked with over 1000 investors!
All these conversations have taught me so much!
But what is most interesting and informative is the similarities among them.
If you think about it, there is a whole lot to learn from the experience of others!
That is why these commonalities are so important to understand when you are getting involved in passive investing.
Because of this, I want to share with you the principles that I have learned through my experience of talking with these investors.
Passive investors are a different animal
The first thing I noticed in my conversations was the similarities in the kinds of people that tended to be interested in this form of investing.
These people are a whole other breed! They are driven, and they want the most from their money.
It breaks down into these three groups.
The Busy Professional
Doctors, lawyers, CPAs, management… These people are working day in and day out in making lots of money.
They work hard, and they want to be able to enjoy the time they have for themselves.
They don’t have the disposable time to be actively managing their investments on top of their busy professional life.
Their time is important, and passive investing allows them to keep it.
Business Owners
Like our busy professionals, our business owner friends are strapped for time.
They have a business to run!
But passive investing is a great option for them.
With passive investing, the money you’ve worked hard to earn works even harder after you’ve earned it. It’s a way that you can grow your wealth without having to be busy. Without spending your time.
Another aspect that they tend to enjoy is the great tax advantages of these investments!
People Who are Retired
Like the last two groups, people who are retired, or close to retiring, have a lot more important things to do with their time.
Their priorities tend to be spending time with family, traveling, or even sustaining their nest egg.
This group wants to keep the cash flow coming in. They want their wealth to continue to grow so they can relax and enjoy their hard-earned money.
Things that are really important
Now that we have an idea of the usual suspects, it’s time to look at the common themes that these people have with one another.
What is important to them?
TRUST
Can I trust the investment? Can I trust the sponsor? Can I trust that the sponsor is going to look after my interest as an investor?
This is HUGE!
Everyone wants their money to be safe. They want to know the person they are working with is trustworthy, and that they are credible.
What a lot of this comes down to is track record.
Does the sponsor have experience investing in these kinds of deals? In this asset class or others?
What have the previous deals looked like? Is there a record of success?
One of the biggest red flags I always tell people about is to make sure that the sponsors are honest about the shortcomings of their deals.
Deals don’t always go well!
Some things go better than expected, and other things go worse than expected. If the sponsor is touting a perfect record, it may be too good to be true.
The relationship between sponsor and investor should be one of trust, not a sales pitch.
As an investor, do your research and trust your gut.
As a sponsor, make sure to be open, honest, and do what is in everyone’s best interest.
TIME
As you have probably already guessed from our lineup of usual investors, time is everything!
People are busy at work, with business, and with their families.
Let’s take our busy professionals as an example.
They are working every day for a high hourly rate. Hundreds of dollars an hour or more!
What many people with high net worth do to invest, is they buy and manage single-family homes.
But think about all that time you need to spend to make that investment profitable. Think about all of the phone calls and work you have to do in terms of your hourly rate.
Is it still worth that cost? No!
That is a lot of work for not a lot of return on your investment and your time.
On top of that, this means of investing isn’t scalable. Even when hiring a property manager, there is a limit to the amount of time you can put into those homes.
Every call about a plumbing issue or needing a new tenant takes away from your other job. It takes away from your valuable time.
Passive investing, on the other hand, can scale endlessly since you don’t have to put in the time to run the property day-to-day. Passive investing is more hands-off.
Talking with over 1000 investors, I can tell you that they want this more hands-off experience. That is what passive deals are so attractive!
EDUCATION
The last commonality among investors is the desire to learn more.
How does passive investing work? What is the process of investing?
There are a lot of people out there looking to invest their hard-earned money, but not a lot of them know a lot about the benefits of passive investing.
If you are wanting to get involved, it is important to get educated about it.
If you are an operator on a deal, take this as a potential business opportunity to help others.
For example, of all the people that we have had a call with or that joined our investment club, we had about 17% of them invest in our deals.
You might think of that as a small number, but I look at it as having been a great opportunity to educate that remaining group of people about the benefits of passive investing.
It is getting them closer on their path to financial freedom.
It’s not only about doing a deal together, it is about sharing the fact that this can be a life-changing experience for you.
I am passionate about this, and I want as many people to be informed as possible!
My mission is to make it easier for investors to understand passive investing, and to build a trusting relationship that is beneficial for both of us.
Now, if all of this sounds like you, or if you are interested in learning more, I have even more ways that I can help educate you.
Check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
