Being "Committed" in Real Estate Investing Pays Off Very Well:-  Another article on this site details how financing private mortgage notes is much like the old saw about how the chicken is only "involved" in a ham and egg breakfast, while the pig is "committed."

 

In real estate investing, being committed means actually owning the property itself and being the landlord, while financing the private mortgage note is being involved in the affair.  As a passive investor with a long term approach, this "commitment" can pay off very well, indeed.  Jerry Cohen, President and Founder of EquityBuild, a real estate investment firm, reports a high average annual return for transactional deals, such as flipping properties.  As Cohen has been involved as a principal in more than 2000 transactions since 1984, that is a returned based on a long, long history of commitment over the decades to real estate investing.

For those "committed" in those deals, their money doubled in as little as every four years.

That wealth creation effect is the history of real estate investing.  Over the last two hundred years, gains from real estate have produced about 90% of the world's millionaires.  Obviously, commitment to a passive approach in real estate investing has paid off very well for many.

This results from when you own rental real estate, you have the power of time on your side.  Historically, rents rise about 5% every year in the United States.  That means that the income received from a rental property will double in less than 15 years.  Passive, long investing in real estate is the best way to benefit from those increases.

If a property is renting for $1000 a month in year one, that rent will more than double by the 15th year.  If the property has a 30-year mortgage on it, the annual rent income received by the time the note is paid off will be over $50,000 a year.  That is free cash flow as there will be no mortgage.  If you have a 15-year mortgage on the property, the free cash flow kicks in even sooner with much, much less in interest payments going to the lender for the note.

There are other benefits to being committed as the owner.  When you are with a property for decades, you learn more about being a real estate investor than you will from simply financing private mortgage notes.  While financing private mortgage notes is an excellent way to profit from investing in real estate, you will have a more in-depth knowledge from being the actual owner, even with the passive approach.

That is the best way to approach any investing.  

As much as possible should be absorbed about the assets that are owned.  Even as a passive investor in real estate, there should be tremendous due diligence and research involved before cutting the first check.  When this is performed as a passive investor in owning rental real estate, a high level of expertise will be developed.  That acumen will only pay off as a real estate investor in all future endeavors, including owning more rental properties or deciding to fund private mortgage notes, should there be a desire to only be involved, rather than committed.

From commitment, comes greater understanding.  That is what all investors should strive for, in real estate or any other asset.  Commitment will result in being a better informed, more experienced investor, with more profits the result.