Four Passive Investor Lessons to Secure Your Money

By: Jen Maldonado, Founder of #CatchHerSpark - a community that encourages women to invest in real estate assets and teaches how members how to raise capital.

Real estate investment has created the wealthiest people in the world, and only 30% of real estate investors are women. Women today control over $14 trillion in assets and still we own less than 5% of the world’s real estate. Why?

– Women believe that they need to be rich to invest in real estate.
– Women think that they need a lot of experience.
– Women believe that only full-time professionals can make money from real estate investment.

We gave our money to traditional investing firms that only gave us returns of 6%. They charged us a minimum of 3% whether they made us money or not. We deserve higher returns and more control over our investments. Women are busy bees trying to balance life and manage our homes. Still, we have options like passive investments. And anyone can become a passive investor.

Passive investors ask themselves – “If we work so hard to earn our money – how can we make our money work harder for us?

My name is Jennifer Maldonado and I help business professionals make their hard-earned money work hard for them through high performance real estate assets. After acquiring and managing non-performing notes, rehabs, multi-family units, extended stay hotels & other private loans that totaled $95M in assets, I learned these 4 lessons about investing with confidence and securing the money.

Lesson 1: Get Educated as a Passive Investor.

Education assists you in choosing the right investment vehicles and opens your mind to new opportunities for economic success and growth. You develop confidence in making investment choices that truly serve your needs. After working with hundreds of passive investors, I learned that educated investors make better investing decisions. We are learning constantly. I love to share knowledge, experiences, resources and make money together with other investors. It feels like a real partnership – not a transaction.

I am part of multiple real estate passive investor Facebook groups, and they have a lot of great information. The concept here is for you to get familiar with the language, learn questions to ask, look at snippets and make connections. One of the secrets of success in passive investment is to ask the right questions.

Lesson 2: Do your Homework with People, Numbers, Feasibility.

Women engage in circular decision making. We do a lot of fact finding. Then, we talk. We research and we learn from each other. Therefore, as a founding member of a group with over 7,000 women, we connect and help each other. We must use that skill to do our due diligence with people. When investing passively in someone’s project, you want to learn about their background (background check and credit), their experiences (good and bad), their core values and even their personal finances. Personally, I use third parties and I let operators know that I will do credit check. I ask inquisitive questions about their experiences in real estate, and I get to know them.

Learn your numbers for every investment vehicle, strategy, and asset type. There are many real estate investing opportunities with strategies like flipping or buy and hold. There are multiple asset types like multifamily, single family homes, and hotels. Each asset will have its own fundamental numbers and value assessments that will allow you to determine the feasibility of the project. However, they are dependent upon one another. Private investors who ignore this fact tend to lose their money during challenging times.

Lesson 3: Determine your investment criteria – Money. Return. Risk.

High returns alone do not mean the best investment for you. Understanding how much money, return and risk you are willing to take, allows you to be focused and effective.

Depending on where you are financially, you must decide how much money you will set aside to invest. My guideline is simple: I do not invest to lose money, but I want to keep my sanity. I invest an amount that allows me to sleep even if I lose that money today.

There are many platforms that allow you all types of investing amounts. Crowdfunding is a platform that allows you to start small. I prefer syndications – and you can find great information about syndications in Security Exchange Commission (SEC) website.

You want a specific criterion of how much you want to make per deal. You can use a percentage of revenue for each investment. The most practical advice to determine a percentage is ask in private investors group what the average return in the industry is for that investment type.

Risk is a very individual decision that depends in multiple factors. When passive investors approach me, they must know their criteria. If they don’t, I share consultants’ information who are not affiliated to me. This way, investors determine the best value for their money, how much they can really invest and what risk they are willing to take.

Lesson 4: Paperwork! Paperwork! Paperwork!

What secures your investment? Real estate provides what most investment vehicles cannot – an investment secured by a hard asset. This means to you that if people do not pay, you will have a hard asset to try to recoup some, all or even more of your hard-earned money. The paperwork establishes the rules of the game, or terms of your investment, and what you can do if they do not pay you.
Sadly, a lot of private investors do not have the right paperwork, or they are not written and managed properly. Hiring a real estate lawyer or specialized lawyer in your investment vehicle will be another wise move to secure your money.

When implementing these 4 lessons, my investors found that they can get higher returns secured by a tangible asset with the least amount of time possible.

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