BiggerPockets Real Estate Podcast - Active vs. Passive Investing: Make Higher Returns With Less Headache?

Episode Date: October 2, 2024

Can you make the same returns as active real estate (if not more) with “passive” real estate investing? What if you’ve got a busy day job, hobbies you want to pursue, or don’t have the landlording drive to build a rental property portfolio? Well, passive income investing might be just what you need. How do you know you’re the right fit for it, and what kind of real estate investments are the most passive? We’re giving you what you need to get started. We’ve got two active and passive real estate investors, Devon Kennard (former NFL player!) and Kathy Fettke, on the show to break down the differences between active and passive real estate investing. We’ll discuss who should invest in each type and whether it’s worth it to stay at your job and invest passively on the side. Plus, we’re all sharing our favorite active and passive investments that we’re putting our money into today. But how much of a return can you make when you’re investing passively, doing less of the work? We’re giving you real return numbers from some of our passive income sources so you can know what to expect when putting your money to work. In This Episode We Cover: Active vs. passive real estate investing and which one YOU should choose How much you can make with passive investing and the returns we’re getting  Why you may NOT want to quit your job to go into real estate (you can STILL invest) Real estate note investing and why Devon is going all-in on this active/passive investment  Why new real estate investors should NOT be passively investing…yet  And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! On the Market Podcast  PassivePockets Podcast Scaling Smart Start with Strategy  Try Baselane, the One Platform for All Your Property Banking & Finances Pre-Order Devon’s New Book, "Real Estate Side Hustle" Property Manager Finder See Dave, Devon, and Kathy at BPCON2024 in Cancun! What Is Passive Real Estate Investing And Is It Right For You? Connect with Devon Connect with Kathy Connect with Dave (00:00) Intro (03:18) Active vs. Passive Investing (09:13) Who Should Passively Invest? (14:45) Better Returns with Passive Investing? (19:20) Who Should Actively Invest? (25:42) Real Estate Note Investing (28:59) Best Active and Passive Investments Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1025 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Real estate investing is a grind. We love it, sure, but it's definitely a grind. Finding deals, negotiating with sellers, vetting tenants, repairing properties. It all adds up to a lot of time and effort to generate the cash flow that you want and need. But there's another way to invest in real estate, passive investing. That can be as simple as putting your money in a fund or a syndication, forgetting about it for a while and then collecting a return later. But of course, there are tradeoffs with this approach.

You can't just do that and expect the same types of returns that someone who's working really hard on their investments every single day are going to generate. It really is a spectrum or a continuum of different opportunities for investors. Some things super active and can generate higher returns. Other things are super passive. You basically do nothing, but you're going to give up some returns. Today, we're going to get into this and break down everything you need to. to understand about those tradeoffs.

We're going to talk about the pros and cons of active versus passive investing and why each strategy might be right for you. What's up, everyone? It's Dave. Today's Wednesday, meaning that we are doing our deep dish episode. And for today's discussion about passive versus active investing, I'm bringing on two investors with a wealth of knowledge on both sides of this debate. First, we have Kathy Fecki, who is my friend and co-host on the on the market podcast.

She's been investing across the... the spectrum of passive and active investing for many, many years, and Devon Kinnard, who invests both actively and in dozens of different syndications and is growing a passive lending business right now. So this is going to be a great conversation, and I think you're going to learn a lot about where you might want to fall along this active passive spectrum. In the conversation, we're going to be talking about what types of investors benefit from passive investing and who is a better fit for more active types of strategies. We'll also talk about why many investors, investors choose to transition from active investing to passive investing over the course of their

real estate investing careers. And we'll discuss how passive investing can sometimes mean both less headaches and higher returns. That and much more with Kathy and Devon. So let's bring them on. Devon Kinnard, welcome to the Bigger Pockets podcast. Thanks for joining us. Thanks for having me. Yeah, it's going to be a fun show. Kathy Fecky, thanks for being here as well. Thanks for having us here. It's just fun. Well, we're here, of course, talk about active versus passive investing. And for my understanding, you both do a little bit of each, as do I. But before I get into sort of the debates, the pros and cons, let's just set the stage and help people understand the spectrum of passive versus active investing that

we're talking about. So, Kathy, I'll just start with you. How would you define, quote, unquote, active investing? Active investing means you're actively doing stuff. You're involved in it, maybe fixing and flipping and wholesaling, being a real estate agent. These are all things that require your time. All right. And then Devon, could you tell us what passive investing means in your world? Yeah, I would say I consider passive, very individual based on how much time you're willing to put into it. So I think you got to kind of determine, like for me, while I was playing in the NFL, my rule was five hours. Like I had five committed hours that I had five committed hours that I can devote to real estate. And that was my definition as a passive. And, you know, today I have more

time on my hand. So I still consider myself a majority passive investor, but I'm willing to put more time into it. So maybe that's more like 20 hours a week. I consider both of them passive, but depending on where I was at in my life, kind of dictated what that looked like. That's a great point because it really is a spectrum, right? There's not like these two buckets where you place some investments into the passive bucket and some in the active bucket. Even certain types of investing can fall along this continuum, but even certain deals can sort of vary in over the course of your ownership of that deal where how active or passive they could be. Just as an example, like I've had a house hack where I did some works and upgrades on it myself.

That was pretty active. I moved out of the country. I have a property manager managing it now. I do pretty much nothing with that property. So there's not like, you know, long-term rental is active and multifamily is passive. That's not really how it works. It's sort of this, this broad spectrum. And we will get into this just in a minute, just like where certain things fall.

But Devon, you know, for my understanding, you started when you were still playing in the NFL. felt like very on the passive end of the spectrum. Where are you now that you have 20 hours to invest? What types of deals are you doing and what are your more active types of deals? Yeah, I would say my more active activity is probably in my private lending company, you know, but more or less I'm reading, scaling smart now from Kathy and Rich, but like more or less, you know, how to kind of build the infrastructure so it can remain what I consider to be passive now. But I would say that's more of my active activity. with my portfolio of properties. I own 29 units now. I still consider that relatively passive. You know,

I'm going through a six-plex renovation in Tampa, Florida right now. And I have boots on the ground there that manage the day to day. And I, you know, get to spend limited time. I'm making sure everything is going on and going according to plan, but it's still fairly passive to me. So I still consider myself a passive investor, but it goes back to I am spending more time than I was while I was though. I love that you're planning ahead to keep something passive because that is, I feel like that's just such a common story in real estate. We're like, oh, I started this passive business and now working 65 hours a week on what was supposed to be my retirement job. So we'll get to that later, but planning ahead is obviously a good way to keep it more passive. What about you, Kathy? You do a little

bit of everything. How would you describe your portfolio these days on this spectrum? Well, I like to, when it comes to rental properties, as we talked about last time I was on the show, I'd like to buy newer properties that require very little of my work and my time. The active part is actively finding the right market, actively finding the right property manager, and then buying something newer in a growth market so that I just don't have repairs to worry about, for the most part, have a good experience property manager in place. And it's pretty darn passive. also because my husband does the accounting, so super passive for me. That's another good strategy for keeping fix passive.

It's just pawn it off on your significant other. Absolutely. But then also syndications are typically a passive way to invest, and we do invest in other people's syndications, but I'm also a syndicator. And as the GP, the general partner, I'm very active. I'm co-managing those projects. that is absolutely active, but I'm also an investor in it, so I'm passive in it too. So syndicators could be both in the same deal. So it sounds like you both are at least somewhat similar to how I do it. It's just a combination of passive and active investing. And a lot of times

people introduce themselves like, I'm an active investor. I'm a passive investor. But I think over time to grow and to scale, you have to do a little bit of both. Because if you're active in every deal, you just can't do that many deals. There's just only so much time in the day. So you have to figure out the right balance. And that's what we're going to be talking about in today's show. Before we move on and talk about how to create that balance, I just want to sort of sort different strategies because the ones that are active, I think, are a little more obvious to people, anything that's owner occupied, like a house hack, a live and flip, pretty much any kind of flipping, right? It's kind of like pretty active. And then, you know, short-term rentals,

long-term rentals, if you're self-managing, at least I consider all of those sort of on the active side of the spectrum. On the passive side, there are a couple of ones that we don't really talk about on the show like REITs, which are publicly traded real estate investment trusts. That's as passive as it gets because you can open a trading app buy a stock and a real estate trust and do absolutely nothing. You could do that. Kathy and Devon both talks about syndication. So you can invest with another investor. You can do funds, which is similar to a syndication. You could buy notes like Devon does. Or the other one I would say is turnkey rental property investing, so where someone buys a property for you. So that's sort of the most passive side.

And then I guess like if you have a rental property or a short term rental, but you have a full-time property manager, that's like, what is that right in the middle of the spectrum? Right in the middle. Yeah. Okay. So that's the midpoint. So hopefully that helps. frame this conversation. So, Kathy, I'll start with you. Like, who is passive investing right for? You know, someone like Devon, when he was playing football, oh, man, the hours he's explained to me before, it's just nonstop. So busy professionals who have a career that they love and they're making plenty of money in it and they don't want to shift into another job that happens to be real estate. There's a lot of confusion about that. People think the only way to invest in real

estate is to flip homes when actually that's it that's a different way to have a job not necessarily investing yeah that is exactly what it is i haven't flipped a home because i already got a job there's other ways to invest in real estate so is was that your experience devon like did you know you wanted to invest in real estate and you then picked a type of real estate investing that matched your lifestyle or were you just looking for places to put your money while you had a full-time job. It was very much kind of find an investment strategy within real estate that fit my lifestyle. You know, there's a lot of people who will say you can't invest passively, real estate's an active business and all that. And I just never really believed in that notion because for me,

it was like either figure out how to do it passively or don't do it at all. And being in a career that I knew was going to end, I'm like, I have to figure out how to do it. So, you know, I just looked at it from a lens of how do I, you know, invest. in a way that I can still have my time, but I can grow up real estate portfolio. Well, you clearly did that, which is quite impressive. Another person who's ideal for passive investing is maybe somebody who lives in a high-priced market, like me, many people who live in California, just have a hard time making the numbers work definitely for regular rentals.

Short-term rentals can be a little bit better, but again, that's a little bit more active if you're managing it. You'd have to find a property manager for that, and that can be a bigger cut. you know, for short term. They take a lot more. So if you live in an expensive market, you almost are forced to be passive because that's how we started. We're like, oh, we can't make the numbers work here. We're going to have to invest somewhere else. We chose Dallas, Texas. That was a three-hour flight from us. So we had to learn how to rely on other people. Yeah, that totally makes sense. And I realize now, you know, we're titled this show, like active versus passing. And now we're just

talking up all the benefits of passive investing. But Devon, tell me, what are the tradeoffs? Because there are obviously, there's no right answer here. But so what are the, what are some of the downsides of passive investing? Well, I'll say the first thing, it's hard to invest passively if you don't have any capital. You know, an active investors, their, their kind of advantage is they can trade time for money. You know, like I'm going to, I can do this flip cheaper instead of hiring a contractor. I'm going to do the work, you know, all of this stuff. When you're investing passively, you have. have to have some level of capital. Now, that doesn't necessarily always mean it has to be your own capital. Like, depending on what you're doing, maybe you can raise capital. Maybe you can use the banks, but you're going to have to be able to have some kind of financial savviness or savings or something to invest. So that's one negative. If you want to invest truly passive, it's hard to do if you don't have access to capital. And another thing is, depending on the strategy, the returns may not be as big. Like for instance, you know, our good friend James Dannard, he might flip a property and he's looking

at the margins that he can make on that flip. I'm not going to make those same margins if I go to flip because I'm going to hire a GC to handle the whole thing and then they're going to probably upcharge me and I don't know the price of things. So I'm not going to grind them down the way James can. So me and James could buy the exact same property and the numbers could look completely different And I can almost guarantee his will look better because he's more active. So I think depending on your strategy, your return may not be as high and you do need some level of capital or access to it. That's a very good point. I think that's why Devon, we probably see so many people start active.

I think that a very common trajectory for investors is starting active. And then once you have capital and once you know the game well, enough that you can vet operators and people to invest with, then you move more passive over time. At least I actually put this in my book. I obviously made a graph of it because I love making graphs and I'm a weirdo. But it was just showing like most people start at like 100% active investments and then aspire to at some point in their career for me, it's like 15, 20 years in to get to 100% passive investing.

And you sort of like do that transition over time. We've got to take a break, but first a heads up. If you're enjoying this conversation and want to learn more about passive investing, be sure to subscribe to the Passive Real Estate Investing podcast on YouTube or any podcast platform. It's Bigger Pocket's newest podcasts. Kathy was actually recently a guest on that show too, and every week host Jim Pfeiffer will talk about strategy, wealth building, and risk management specifically for syndications and other types of passive investments.

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Flagship Fund. This and other information can be found in the fund's perspectives at fundrise.com slash flagship. This is a paid advertisement. Welcome back to the show. Here's more with Devon and Kathy. So I know everyone says this, people who are very active, like disparage passive investors and be like, oh, the margin's not so good. And I know there's truth to that, but I'm going to challenge that wisdom a little bit

because it's only true if you really, know what you're doing. So, for example, in my investing career, the things I quote unquote buy actively, like things I buy direct small multifamily, single family homes are things that don't require a lot of rehab or renovation because I just don't have that skill. So I will take money that I want to put to value at investing and I'll give it to a syndicator or I'll put it into a fund because, yeah, I'm giving up a couple percentage points to that syndicator. But if I did that myself, I would lose 20%. Like, I don't know how to do that.

And so I think people are like, oh, it's not the maximize return. But when you look at yourself as an individual, like, could you really get that return? Because for me, giving it to someone who knows what they're doing, I'm still getting a better return because I'm giving it to a competent operator who's going to be a good steward of my investment. Well, you know, I want to add to that because I kind of think if you're truly a passive investor, I even mentioned this in my book coming out real estate side hustle. And I say, like, it's kind of playing checkers and chess. Like, you're looking at it completely differently because if I have a day job that I'm making good money at, I don't have the time to be active. And I don't want to try to

take on an active investment that's going to take away from my day job. So investing passively and getting a lesser return, but netting it out over what my life looks like and being able to perform well at my job. Or maybe it's somebody who wants to travel the world and do that. So it's not monetary game, but it's like the lesser return to be able to live life how you want to, I think is worth it. And I see a lot of passive investors. They kind of think they're playing the same game as the active person when you need to look at it differently. Like you're investing passively for a reason. Stop comparing yourself to the returns that the active guy is getting when you have a different objective. That's a great point. And yeah,

it's also about sustainability, right? Like, you could do a lot. of active investing and burn out pretty quickly. But if you do passive investing, you could just keep doing it because it's not super intense and it's not interrupting your lifestyle. And I think your point about your other career is really important to Vaughn because, you know, picking stuff that allows you to keep doing well at your job allows you to generate more capital to invest passively with. You know, so like, at least that's how I've always looked at it because I work at, you know, I work full time and I care about my non-real estate career.

And by being good at that job, I have the security. I have health benefits. I have a lot of things that allow me to take risks with my other investing that I probably couldn't if I was just going full on into active investing. It's like all our books apply here. Dave, start with strategy, right? Too many people don't. start with strategy.

And then Devon, you know, the real estate side hustle, he puts four different ways to invest passively in that book. And it's really well written and exactly the way I would have described investing in passive when you're a busy professional who's good at your job. You know, you've got doctors, you've got lawyers, tech industry. That's kind of, you know, I'm from the San Francisco Bay Area. These people work 60 hours a week. They don't have time to be flipping houses on the weekend.

but they make money and they want to be investing it. Because Devon says something really good in his book that as a football player, as a pro, what did you say? It's like three and a half years is the average career. Yeah. Oh my God. Really? Yeah.

So you're making a bunch of money, but for three years. So, man, if you don't invest that well, you could end up broke after being rich and that's no fun. It's better just to be broke and never know what it was like to be rich than rich and that broke. But then he says, but that could be anyone, right? That could be anyone could get cut after three years, no matter how good you are. So having that backup plan and investing the money that you make from that career, like Devon did so that went his very long career, actually, eight years, nine years? Nine, nine, yeah.

Nine. Came to an end. He set himself up well, you know, instead of spending it all along the way. I think we've all shown our bias here when we're talking about active and passive investing. But let's talk about active investing because I started as a pretty, a fairly active investor, I guess I would say. And I know you guys do stuff on the more active side of things. So, Kathy, why don't you tell us, like, who's active good for? People who have more time, who have the ability to learn and are passionate about that thing that they're learning.

If you treat the thing you're actively going to do like a business or like a job and you become very, very good at it. And that's your job. And you love it, then that's who it's good for. When Rich and I did a couple of flips, we weren't good at it. You know, that just was clearly not our forte, and we learned that pretty quickly. I also tried to wholesale once, or maybe it was subject to. It was one of those. And the lady that I talked to was so mad she came into my office and threw food at my office manager. Oh, my God.

Because apparently I was very rude in the way that I made the offer. So it was like pretty early on, I'm not good at this. I don't like knocking on doors and trying to, you know, negotiate these deals, whereas other people are great at it. So just like any job, you got to love it, you got to invest in it so that you really understand it, put time in it and be passionate about it and you'll be successful. But dabbling, dabbling is where people get in trouble with active investments. Like a family member who's like, oh, the house next door is for sale, I'll just buy that and never had time to fix it up, had it for two years, lost a ton of money.

actually, I think eventually lost it in foreclosure. So dabbling and active is risky. Devon, what about you? Who do you think succeeds as an active investor? Someone who has the time, ultimately, and the desire to do it more actively. Like, you know, my biggest active activity now is like my private lending company. And the reason why I'm doing that is I have a chance to earn a higher return. I can invest passively in private debt funds and get a 10% return or I can do it on my own and build the infrastructure and be a little more active and annualize a 16 to 18% return on my on my money you know because you know when you really run the numbers that's what it is so I'm like okay is it worth being a little more active and

and getting a higher return and with where my life is now I think it is and because that money is going to be money I can live off of as well as continue to keep investing so um you know know, I think the time and your willingness to kind of devote a little bit more time, but that was my factors. Like, I looked at lending and I'm like, I know I want more income. I can do it passively and get a 10% return or I can do it actively and get 16 plus. I'm going to be a little more active and try to build it the right way to where it's not too active. But, you know, that was my decision. And I think people in that position could make the same choice. That's a great point. And I mean, I don't blame you.

The difference between 10%, 16% return may not sound like a lot, but it's a huge amount. So that's worth it, you know, for your time. And you've still found a way to do it. So that is why people say doing active, you earns, you know, can be really beneficial. I will say that I also just think active is really good for newbies. And I know that's not always the most logical thing. but from my experience, I learned so much by self-managing for a few years. You learn so many of the things that we're talking about today.

First and foremost, you learn the things you like and you don't like, like Kathy said. You know, I never tried flipping, but I just learned that heavy renovation just wasn't for me. It was too stressful for me because having a full-time job and trying to coordinate with contractors while I was at work. And it just like wasn't right for me. I learned that I do love acquisitions. I love looking for markets. You know, I like those kinds of things. And so it allows you, it sort of sets you up for the future of your career, even if you don't want to be a full-time investor.

I, even when I was active, I never intended to be a full-time real estate investor. But I did it to get my hands dirty and learn a little bit. And I do think that makes sense for a lot of people who could even just be active with one or two deals. It's not like you have to scale this active portfolio, but just being. there and learning with your hands on a project can be really beneficial to people. The other thing that I think is also super valuable for people to be active is people who just hate their jobs. I don't know.

I don't know how else to say it, but people always ask, like, should I quit my job and go to real estate? Like, do you like your job? Because if you like your job, no. Stay with your job and invest passively. But if you really hate your job, you could probably make a career in real estate investing, but you should know that it's just going to be another job. But if you feel like you'll like being a full-time real estate investor

and you'll find it more fulfilling and enjoyable than working in whatever career you have currently, then that might be good for you. I do want to say something about that, though. I was at the investor event and Kim Kiyosaki spoke, and a woman got up and said, you know, I'm so scared. I'm so scared to invest because I have this great career, and I'm just so afraid that if I dive into real estate, all fail. And Kim looked at her and said, well, why would you do that to yourself?

What she meant was, yeah, why would you leave a successful career to dive into one you have no clue about? And that's what so many people don't realize is that real estate's a career. And it takes some time to learn. And, you know, you hopefully don't have a doctor who just was like, hey, I just decided to be a doctor and just dives in. And no, it takes years. So, you know, Kim was just basically saying, in the beginning, you've got to set yourself up, have enough savings in place, have, you just don't, don't make the leap thinking that you're just going to be able to get up to speed immediately, have reserves in place. Nothing beats the comfort of having reserves. All right. Time for one last break. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where props, comes in. With PropStream, you get instant access to over 160 million properties nationwide.

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Stop letting outdated lending practices hold you back. That's hostfinancial.com, where your property's potential meets unlimited financing. Thanks for sticking with us. Let's jump back into this week's deep dish. So tell me, Tavon, a little bit about your investing. Why, now that you have some more time, of all the ways you could invest, why did you choose note investing in doing private lending? It's something I dabbled in while I was playing.

My big motivation was, was once my fast money, I call it, like income from my job is done, I'm going to have a chunk of money invested, but I'm going to run out if I don't, you know, have any other consistent income coming in. And, you know, I was doing a lot of research figuring it out because I was a big, like, cash flow guy, like, oh, I'm investing in these for income. And what I was looking, I own 29 units now. And the income I was generating, I wasn't on track to hit the income levels that I wanted. And, you know, the lending business seemed like the right solution for me to offset the other income I already had coming in from syndications in my portfolio, but then also give me

that money so I can keep growing that portfolio. I mean, that makes total sense from a strategy perspective. I'm just curious if you entertained other ideas. Like, if you'd done burs or flipping, you know, with your time instead, that wouldn't have gotten you the cashel you were looking for? I think it would have, like, especially flipping. It definitely would have, but I don't want to be active to that level. Like, although I'm more active in my private lending business, I'm working really hard to build out SOPs, bring in virtual assistance, a onboarded software to where, like, a lot of the back-end work is going to be handled. And I get to do a lot of finding the borrowers, going to networking events locally, doing the kind of stuff that doesn't feel like work to me,

and have a lot of the back end stuff handled, but still get those kind of returns that we discussed a little bit ago. So if I were to go into flipping, I'm going to be a lot more active, and I didn't want that. So I'm like, I can kind of use my capital to maybe even joint venture into some flips if I want that opportunity with contractors, but I didn't want to become a flipper myself. And then saying, well, I could do the birth strategy, but, you know, the cash flow is not that great. I refinance out and I got out of my capital back, but I like, what about the consistent income? For something for me, I want a certain level of income consistently. And I didn't feel like Burr was that strategy. So with what I'm doing now, I can generate that income and then continue

to buy properties 50% LTV, which is kind of my marker. And kind of on your guys' model, buy a lot of stabilized properties. I do do some value add, but mostly stabilized and continue to grow my portfolio like that. I love that. It's just such a good example of how customizable these different strategies in real estate is in general. Because as Devon said, this is his quote unquote, active part of his portfolio, but is probably way more passive than what other people would consider, right? And it's just finding something that works for you. And again, knowing so clearly what you want seems like has allowed you to say, like, out of all these different strategies along the spectrum of

active versus passive, you've found the one that not only is the right time commitment, but generates the right type of returns, not that you're looking for in your career. That's super cool. All right. Well, we do have to start winding down here, but I want to know from each of you, if you are giving advice to someone in our audience, what's one active style of investment you're excited about right now? And what's one passive style of investment that you're interested right now?

Now, Tavon, I'll start with you. Passive came up to mine first. So on the passive side, I'm really still like buying good quality, single family properties. I like that's what I'm going to continue to do. I'm leaning more towards your guys's strategy with more renovated buying good paths of growth. You know, I think that's a great route to go. And reason why I like that right now better than a lot of even syndications and stuff is just because you have control. So what I like with my assets is I get to decide.

when I refinance. I get to decide if I want to do a helock. I get to, you know, make all the calls on it. And I'm really enjoying having that flexibility. So I love that on the passive side. On the active side, I think it kind of depends on your goals. But I, being a lender myself, I know a ton of people making a killing with fix and flips. I think there's risk in that. But if you're willing to go all in and you're in a growing market, I think you can make, you know, what I'm seeing some of these fix and flippers make, I'm like, geez, man, like more power to you. Totally.

If you're willing to do that, it's a good business. I would say you need a distinct advantage in that, maybe contractor relationships if you're not one yourself. But I think that's a great way. You can make large chunks of money and pile up some good capital in a short amount of time. So I would recommend that on the active side. And in between, I think private lending, I think more people with self-directed IRAs.

could get into lending. I think more people with capital just sitting in bank accounts could get into lending. So I think if anyone's out there looking for something in between, I think it's a vehicle that a lot of people forget. That's great advice. I was going to give the same advice about flipping, but I felt like a hypocrite because I was like, I don't flip houses. But I don't.

But for people who want to be active, the margins are great right now. I know it sounds counterintuitive because so many people have, there's so much media headlines about what's going on in the industry. but talk to a house flipper who's experienced. They're doing just fine right now. They are doing just fine. I didn't realize they were making as much as they were until I started underwriting some of their deals and seeing it. And I'm like, goodness.

Yeah. Maybe you should be doing some equity deals instead of those loans devised. Yeah, seriously. What about you, Kathy? What are you recommending on either end of the spectrum right now? What I'm excited about on the active side is build to rent. I think I've talked about that on the market a few times. We're building build to rent communities right now in the San Antonio area.

We have a single family rental fund in Dallas. That's fun on the active side. But I also get to be passive in those too because you can be the GP, but you can also invest in your own deal. And kind of like Devon said, have a little bit more control over that. And then on the totally passive side, I've been kind of dabbling, as you said, I like to dabble in some of these more exotic type properties where you get to use it, but also. make money on it. So an example is I have a developer friend in Utah right by where Deer Valley is doubling in size. So right there, I love areas where there's growth happening. And the ski resort is going to be the biggest in the country. Huge resort. And we bought an eighth of a share in one of

the short-term rentals right near it through our friend who's the developer. And they just kind of manage everything. We still get to use it six weeks out of the year, but otherwise it cash flows. If we don't want to use the weeks that we have, we can put it on the short term or long term market or use it for third home. So there's like all these personal uses because for so many years I was buying properties in places like Ohio and Detroit. And I was like never going to see these properties and certainly never using them. And so now it's like, ooh, I could possibly get the same kind of return but get to use it and it's cool and exotic. So I'm just kind of looking into those. And already the appreciation has gone up. The thing isn't even done. I mean, are you

it's done, but the whole development isn't done yet, and it's gone up dramatically in price. So that's kind of fun, too. Awesome. Great, great advice. For mine, for active investment, I need to come up with a name. I'm not good at branding things, but I've been doing something called I'm just going to term the delayed cosmetic burr is like this thing that I keep doing where you buy a property, it's stabilized, and it's cash flowing as is.

And it's like a good asset and a good neighborhood. And then you just burr it opportunistically. Like, I'm not going to force it vacant. I'm not going to buy a vacant. I'm going to buy it with people in it. And then one unit at a time, as people move out, I'm going to plan a cosmetic burr, and I'm going to renovate it. And then I'm going to refinance it when I've done that to all the units.

And I know that doesn't sound like rocket science, but I think this artificial urgency around a burr talks a lot of people out of it. Like, you have to do the burr. You have to sell it within two months. You have to do everything like it's a flip. But it's not a flip. You can just buy it and you can have it like cash flow while you wait to do a renovation. And so that's sort of what I've been doing with my active portfolio.

And again, to maintain time, I do it one at a time. I'm not doing multiple renovation projects at once. I'll just do this when I have these units. And then honestly, it's a great way to get deals because I'll buy a deal that maybe is a 2% cash on cash return. I don't care. then I'll renovate it six months from that. Then it's an 8 or 10% cash return. Great.

And now it's in a really good condition. I'm not going to have to take care of it a lot for the next couple of years. I'm super happy. So I've been doing that more on the active side. And then on the passive side, I'm just going to say I've been investing in debt funds. Definitely not getting that 16 to 18% return to Vaude is getting. But, you know, you can get 8 to 10% pretty reliably in a debt fund. and if you work with a reputable operator, the risk is, I think, pretty darn low.

And you're doubling a high yield savings account. You're probably tripling what you can get on bonds these days. And so if you're looking for additional cash flow with truly nothing to do, debt funds are a pretty good way to do it. All right. Well, thank you guys so much for joining us. This is a fun conversation. And hopefully it helps you all understand the spectrum of active to passive investing.

and that you don't need to make a decision. You don't have to be an active investor or a passive investor. You can customize real estate to whatever works for you. And you can see just examples of how Kathy Devon and I have each done that in our own careers and in our own investing journeys and encourage you to do the exact same. Honestly, did not mean for this episode to become like a book discussion. But we all three of our books came up. So if you want to grab.

Kathy's new book Scaling Smart. Devon, when does your new book come out? October 15th, so right after BPCon. Well, two weeks from now, I think, from when this will air. So check out Devon's new book as well. It's Real Estate Side Hustles, what's called? Yeah, yeah. Awesome.

Check that out, and congratulations ahead of time. I'll put a link to both of those books in the notes below. So check those out. All right. Well, Devon, thanks so much for being here. Thanks for having me. This was a blast. Yeah, likewise.

And Kathy, thanks as always for bringing your expertise to the show. Thank you. It's great to be here. And I hope to see you all at BPCon is going to be a blast. I'm bringing the whole family, the grandkids, everybody. Me too, Kathy. You convinced me. Whole fam's coming out.

I can't wait. Oh, excellent. Awesome. Well, when this episode comes out, we'll all be hanging out in Mexico. So hopefully you'll be listening to this on your plane ride to BPCon. And you'll see all of us there. Yeah, I'm actually, I'm doing talks with each of you. individually. So I'm doing one with Devon about passive investing and doing one with Kathy about

data analysis. So this will be a lot of fun. All right. Well, thank you all so much for listening. For Bigger Pockets, I'm Dave Meyer. We'll see you all soon. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any

asset, real estate included involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.