One of the biggest benefits of real estate investing is the sheer variety of different ways you can get into the market. It’s one of the most dependable ways to grow wealth and offers great diversification for any investment portfolio. However, there are different ways of investing, and, largely, they can be classified into two categories: active and passive. Here, we’re going to look at the differences, the benefits, and the drawbacks of each so you can work out which might be the best for you.

What Is Active Real Estate Investing?

With this type of investment, you are the one who is driving the project forward. This often means buying or building your own property, improving and renovating it, and then managing it with tenants or selling it. If you’re more willing to take on more of the risk of investing yourself, or you simply find that you have industry experience you could benefit from, then you might want to do this. Active real estate investors spend more of their time making day-to-day decisions and coordinating with others on the ground, giving them a greater degree of control and the opportunity to personally add value to a property. From flipping houses to being a full-time landlord, there are many different types of active real estate investing opportunities.

What Is Passive Real Estate Investing?

If active real estate investing is the hands-on approach to property, then passive real estate investing is naturally the more hands-off approach. Rather than directly managing properties or projects, you may instead put your money into real estate deals that are run by others, such as real estate investment trusts (REITs), crowdfunding platforms, or becoming a limited partner in a real estate syndication or fund. This path does require you to rely a lot more on a third party, like a property management company or project sponsor, to do the heavy lifting. This removes some direct control and loses some of the profit that goes to this third party, but it does allow you a lot more freedom to focus on other parts of your life or career.

Know The Help You Need

Regardless of what type of real estate investing you get into, one thing remains true: your network is a valuable resource. However, the kind of professionals you welcome into that network will change greatly from active to passive investments. Active investors need those who can help bring their projects to life, like general contractors for renovations and building, architects, and engineers. Meanwhile, passive investors typically need the help of property management companies if they’re handling tenants or a financial advisor to help them find the best passive opportunities. Real estate agents and attorneys are vital for all kinds of property, too.

There are significant benefits to both active and passive investments in the real estate market. What matters the most is that you know what you’re aiming for, what kind of properties work best for them, and what team you need to build to make the most out of them.