Buying an Investment Property: Active vs. Passive Management

May 13, 2021

Rental Properties in Fort Erie

Real estate is a promising income-generating investment, and there are an increasing number of strategies and opportunities available to real estate investors. But with the growing list of options, real estate can be a complex investment, and it’s more important than ever to understand the different types of real estate investment methods.

The first question any potential real estate investor needs to answer is whether they are interested in an active or passive investment model.

Let’s look at some of the key differences between these two and consider which is the right approach for your situation.

Active Management

An active management approach means what it says – you as the owner are committing yourself to be actively involved in your investment property.

This is an often-overlooked application of that age-old real estate motto, ‘location, location, location;’ to be actively involved, you need to be based in the area where you’re going to be investing. This might seem obvious, but you’d be surprised how many people look for Fort Erie houses for sale who think they can actively manage a long-distance rental property.

If you can’t be on location where you’re needed, you may be setting yourself up for a frustrating experience that will almost certainly eat into your investment return. Being local also means that you have a better understanding of the local risks and opportunities in the area you’re wanting to invest.

When considering active management of your investment property, your time will be as much of a factor as your budget. Do you have the time and basic skills necessary to be a landlord? Do you have the temperament to interview tenants and build a mutually beneficial relationship with them?

If something breaks in the middle of the night or on a weekend, do you have the time and skill to deal with it, or can you afford to hire a property manager?

Passive Management

Passive approaches to real estate investment are a somewhat newer development, and generally less well-known than the active approach where you own a property and rent it to a tenant.

Where active management can be much more straightforward and tangible, one of the key advantages of a passive model is its flexibility.

Passive real estate investment is ‘hands-off’ as far as the investor is concerned. To use our earlier example, passive management makes long-distance property investment much more accessible: go ahead and look for Fort Erie houses for sale even if you don’t want to ever leave Calgary. 

The whole process of acquiring and managing property is handled by a dedicated team of professionals at a specialized investment firm. This takes a lot of guesswork out of the property management, but it introduces a whole new set of factors.

You’ll need to research the historical performance of the firm you’re considering investing with, and decide whether the fees and expenses are an acceptable trade-off for the convenience.

Whether you decide that an active or passive model suits your lifestyle, we can help you identify and acquire the perfect investment property for your unique situation.

Give us a call today, we would love to help. Call Today! 289-273-4197

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