Recession-Proof Real Estate Investing by J Scott

Author:J Scott
Language: eng
Format: epub
Publisher: BiggerPockets Publishing
Published: 2020-03-15T00:00:00+00:00

Passive Investors

Passive investors are those who invest in syndicated and group-funded deals. We talked about syndications earlier—many large multifamily investors will bring together a group of investors with money and create a partnership that benefits everyone. The person running the syndication is doing all the work and those investing money are just putting up the cash and collecting returns. They are purely passive investors.

When these passive investors no longer want or need to invest in these types of deals, the syndicators lose their livelihood. These are deals that typically cost millions of dollars, and if the person putting the deal together can’t find passive investors, they won’t be able to do any deals.

How does passing investing get impacted throughout the cycle?

Passive investors are much like private lenders. Economic sentiment is going to play a huge factor in whether they are comfortable in deploying funds for real estate deals. While passive investors are going to be a little bit more comfortable investing during the non-expansion parts of the cycle, don’t expect this money to be flowing freely. Also expect that any passive investors you can find during the contraction or recovery parts of the cycle will be looking for higher returns to compensate for the higher risk.

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