How to Get 80% of the Benefits of Real Estate Investing with 1% of the Time and Effort | Ezine Daddy

from dr Peter Kim of Passive Income MD, WCI Network Partner

While many of us like to think we’re superhuman—or at least try to act like one—the truth is, we don’t have infinite resources at our disposal. The biggest limitation is the time we have. The day has only 24 hours and the week has 168 hours.

When we devote our time to something, it means we cannot spend it on anything else. Something must give.

For example, you want to spend as much time as possible with your family, but you also need to work to earn income to support your family. You also want to spend time doing other things you enjoy doing. So the key is to minimize the time you spend on things you “have to” do that you don’t enjoy, but still maximize the value you get from those things.

For example, how can you get the maximum benefit from working time? Well, the best way would be to find out what is the best way to get compensated for your time. If you knew that working eight hours a day and making $150 an hour would give you the lifestyle you desire, then why not try figuring out how to work four hours a day and make $300 an hour ? Then you can free up your time to do other things you really enjoy.

One of the best ways to do this is to earn passive income where you are not directly compensated for the time invested. You can use your time to earn more income. Real estate investing is a great way to generate that passive income, but even in real estate investing, there are ways to maximize the benefits while minimizing the time and effort involved.

I like to focus on the 80-1 rule, and we’ll get to that in a moment. . .

Benefits of investing in real estate

Any discussion of maximizing utility should begin by outlining what those benefits are.

As discussed in previous posts, the main benefits of investing in real estate are:

  1. Cash flow (income in your pocket each month)
  2. Appreciation (value increases over time)
  3. Tax benefits (offers opportunities to minimize your tax burden)

80-20 rule

The Pareto principle states that 80% of benefits come from 20% of causes. For example, he found that 80% of the crop came from 20% of the crop. Not everything brings benefits in the same way.

Think about how that sounds true in your life. Eighty percent of the joy in your life probably comes from a handful of things you do or people you spend time with. It probably makes up almost 20% of how you spend your time or the people you interact with.

I’ve thought about this rule quite a bit when it comes to real estate and I’ve been trying to figure out how to get the most benefits with the least amount of time and effort. And I absolutely believe I’ve found it investing in passive real estate businesses like syndications and funds.

What is passive real estate investing?

I usually refer to passive real estate investing as investing in syndications and funds. That means real estate professionals put deals together, and I have the opportunity to invest in that deal as a limited partner.

The word “limited” means that I have little control over how the business is conducted, but my time and effort are also limited.

By investing in these deals (and I have now invested in almost 40 of them) I am able to leverage the collective knowledge, experience, connections, financial strength and team to generate passive income. If done correctly, it doesn’t require a lot of time or effort.

After the initial due diligence phase and capital investment, the process is somewhat automated. You will receive an ownership interest in this investment and income checks in the mailbox (or direct deposit). Essentially, you are building a system to make money while enjoying quality time with loved ones.

One of the biggest disadvantages of passive real estate investing is the lack of control compared to active real estate investing (owning your own rental property). I’ve found Control to be worth an additional 20% benefit. These benefits include the ability to choose what to do with your investment – keep it, sell it, swap it, etc.

However, the downside of active real estate investing is also control, which means you are expected to make the best professional decision to optimize the investment. It’s not that we can’t do it, but it just takes a lot of dedication and experience to get results.

Don’t get me wrong, there are times when I really want that extra 20% of benefits; and when I do, I add cash flow real estate to my personal portfolio.

But most of the time I want that income to come to me passively.

I have found that passive real estate investing offers 80% of the benefits of outright ownership with just 1% of my time and effort. That’s why I like to call it the 80-1 rule.

Real Estate Syndication

I can still see cash flow and wealth growth through passive investing; get tax breaks; use the time, experience and connections of others; and above all gaining time for the things I love.

What does that 1% of time and effort mean? Well, it’s used to do the right due diligence to make sure the investment meets your goals and risk tolerance. Before investing in any business, you should be confident that you know why you are investing in it.

You worked hard for the money you saved. It would be a shame to spend that money (and the time you spent creating it) on something that’s going to be a bad investment.

So, learn how to properly vet the sponsor, the deal itself, and the market that surrounds the deal. There is no guaranteed return or capital protection for any investment. Once you learn how to do this well, you’ll be able to get to a place of trust pretty quickly.

Once you’ve invested, you literally sit back and wait for distributions and updates to come your way. It’s as close to passive income as you can get.

Final Thoughts

Do you want to maximize your income and the benefits of investing in real estate with focused time and effort? Does the 80-1 rule sound like something you’re looking for?

Then passive real estate investments could be the right path for you. We talk about all this and more in detail in our upcoming course – Passive Real Estate Academy. Are you sure you want to know everything about investing in real estate? Here you can take a seat right away!

As busy professionals, TIME is our most limited resource. When investing in real estate, we try to make the best use of this time, getting the most benefits with the least amount of time and effort.

Would you rather invest actively or passively in real estate? Have you ever participated in real estate syndications? How was your experience? Is the 80-1 rule possible? Comment below!

Leave a Comment