How Hands-on Do You Want To Be?

Last updated: April 2024

By: Chelsea Kulhanek

When evaluating your financial goals, consider how much time and energy you want to devote to managing your assets. Real estate investments, in particular, can be very time and labor-intensive, involving direct management of property, or can take a more passive form like fractional ownership. 

Direct management means that you will be involved in the day-to-day activities of the property, from finding tenants to handling maintenance and repairs. Mediating tenant disputes, tackling emergency phone calls and mitigating unforeseen issues such as weather events or undesirable tenant activities can happen at any time, often making property management a full-time job. This approach can be time-consuming and require a certain level of expertise, such as knowledge of construction management and landlord-tenant laws to optimize property operations. Alternatively, passive real estate investment can mean engaging a third-party property manager or simply making an investment as a limited partner in another’s project. 

So how do you decide which approach is right for you? The answer depends on a number of factors, including your level of expertise, your available time and resources, your location and your investment goals.

If you have experience with construction and property management or have the bandwidth to learn the ins and outs of day-to-day management of a property, a more hands-on approach would give you greater control over your investment and potentially higher returns. However, if you’re new to real estate investing or don’t have the time or expertise to manage property yourself, a more passive approach may be the better option. Additionally, a hands-on approach can only be enacted if you’re geographically proximate to the real property. 

Real estate syndication offers one low maintenance way to invest in real estate without active management. In syndication, a sponsor manages multiple investors who pool their money to purchase a property, which is managed by a third-party company. As a result, only the sponsor oversees the day-to-day management of the property.

One of the biggest advantages of real estate syndication is that it is not time-consuming for non-sponsor participants. A third-party manager, whose work is monitored by the sponsor, frees up the investors’ time for other activities.

Moreover, real estate syndication offers the opportunity to invest in a diversified portfolio of properties without significant capital. Real estate syndicators raise funds from multiple investors to purchase properties and leverage them with debt, providing investors with access to higher-cost opportunities. In addition, diversification from buying into multiple syndications reduces risk and increases the potential for returns. However, not all syndication opportunities are equal in terms of quality and risk level. When evaluating syndication opportunities, assess a sponsor’s experience in the asset class, track record and its management or ownership structure.