Active vs. Passive Real Estate Investing

Investing in real estate is an excellent way to diversify and strengthen your portfolio. Among many other benefits, real estate investing provides attractive total returns, tax advantages, and the opportunity to acquire a tangible asset. There are two approaches to real estate investments: active and passive. Both offer varying degrees of investor responsibility and risk tolerance and require different levels of capital and experience.

Active (Direct) Investing

An active, or direct, investment is when the investor assumes full responsibility for the investment after the transaction is complete, including managing and maintaining the property and making all decisions regarding the asset. Active investing is typically best for experienced investors who prefer to have full control of their investment. The investment asset can be something as simple as a $400,000 residential multi-family property, or a large commercial multi-tenant property with a purchase price in the millions.

active investing

Active Investing Benefits

  • Direct asset ownership
  • Singular ownership
  • Absolute control
  • Active responsibility

How Allegro Serves Active Investors

In an active investment transaction, Allegro serves as the buyer’s broker. In most scenarios, the investor is looking to invest in real estate through the purchase of an office building, single tenant building, retail spot, residential property, or something else, and comes to Allegro with a budget. We walk that client through our proven acquisition process, evaluating the client’s goals and establishing project timelines, combing through the market for opportunities, and performing due diligence on selected options, all the while helping the investor to develop a negotiating strategy, negotiating on their behalf, and documenting the transaction. Allegro serves as a trusted advisor during the entire process after which the investment management responsibilities are relinquished to the client.

When direct investing in real estate, one of the major benefits to working with a broker, such as Allegro, is that it signals to the seller’s broker that you are serious. Sellers can waste a lot of time with unqualified buyers, but when the buyer is working with a brokerage firm, the seller knows the buyer has the resources needed to complete the acquisition.

Passive (Indirect) Investing

A passive, or indirect, investment is when the investor is interested in adding a real estate asset to their portfolio, but does not have the time, interest, or level of sophistication required to actively manage and maintain the asset. This type of investment involves private equity opportunities which offer the benefits of actual ownership without the obligations of active ownership. The equity requirement for passive investments is typically smaller, starting as low as $50,000.

passive investing

Passive Investing Benefits

  • Built-in expertise
  • Limited risk exposure
  • Flexible equity requirement
  • Gives local individuals the opportunity to participate in the economic development of their community

How Allegro Serves Passive Investors

Bluewater Capital Partners, a real estate investment holding company and partner of Allegro, identifies and creates real estate investment opportunities, then raises investment capital to bring those projects to fruition. Bluewater Capital Partners and Allegro then manage and maintain the assets. Through Bluewater Capital Partners, Allegro is able to provide access to scarce opportunities and act as a reliable investment partner throughout the lifetime of the investment.

Both active and passive investing provide substantial benefits for the investor who is interested in real estate. Contact us to learn more.

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