In real estate, there are two primary investor types: passive and active. Both can be lucrative but there really is no clear-cut choice which is better simply by their definitions. Instead, it has to do with the nature and inclinations of individual real estate investors. While the two types certainly imply thepassive vs active investors nature of the investors, as it relates to real estate, there are some distinct differences that will move an investor in one direction or the other.

The Active Investor

As it relates to Real Estate Investing, the active investor is in fact involved with the day to day operations of the business. If not day to day, then certainly involved with identifying and evaluating potential deals before the property is put under contract. The active investor many times starts out flying solo but soon realizes getting bigger and closing on more properties sooner means adding other professionals and forming a team, each with individual duties. On this team, the real estate agent is directed to located potential deals and analyzes current and as-repaired value. Another team member involves a general contractor who inspects properties then calculates the costs and time needed to bring the property to market.

The Passive Investor

A passive investor participates in a transaction primarily as a source to fund all or part of a potential deal. Instead of searching for properties or building a team of professionals, an existing real estate company, a turnkey real estate company, performs the necessary duties required to identify, evaluate and close on a deal. The passive investor merely looks at the potential final product and is asked if buying and flipping or holding onto the property for monthly cash flow and equity accumulation is appealing. The passive investor can also employ the turnkey company to manage the rental property on behalf of the investor for a fee.