100:00:00,000 --> 00:00:04,960So you've heard that Real Estate is one of a few investment opportunities that can make you a millionaire.

200:00:04,960 --> 00:00:08,960You also know that it is one of the best hedges against inflation.

300:00:08,960 --> 00:00:12,000Did you know there are three ways to become a Real Estate investor?

400:00:12,000 --> 00:00:17,040Hey everybody, welcome to the Bill Young, Grow What The Podcast.

500:00:17,040 --> 00:00:18,880My name is Rulita Shree.

600:00:18,880 --> 00:00:23,840In today's podcast episode, my returning guest, Joseph and I,

700:00:23,840 --> 00:00:28,320are going to share what an active, passive, and hybrid investor is.

800:00:28,320 --> 00:00:30,320So be sure to stay until the end.

900:00:30,320 --> 00:00:33,120Without further ado, let's get into this.

1000:00:33,120 --> 00:00:37,120So it is good to have you back on the podcast.

1100:00:37,120 --> 00:00:39,120Tell us how's everything been going?

1200:00:39,120 --> 00:00:41,120Everything's been going well.

1300:00:41,120 --> 00:00:44,160Let us talk about an active investor.

1400:00:44,160 --> 00:00:45,840What is an active investor?

1500:00:45,840 --> 00:00:51,840An active investor is someone that goes out there and they have to actively find their own deals to bring value.

1600:00:51,840 --> 00:00:54,800So there are different types of active investors.

1700:00:54,800 --> 00:00:59,040We have wholesalers, prehabers, and rehabbers.

1800:00:59,040 --> 00:01:02,240The mind telling us what a wholesaler is.

1900:01:02,240 --> 00:01:05,600So a wholesaler is someone that goes out in their acquire a property,

2000:01:05,600 --> 00:01:09,600and let's say a hundred thousand, and then they turn around and they look to sell it for about

2100:01:09,600 --> 00:01:13,760a hundred and ten thousand, so a person is going to then go and flip the property.

2200:01:13,760 --> 00:01:16,240So then what is a prehaber?

2300:01:16,240 --> 00:01:20,880So a prehaber is basically the next step above a wholesaler.

2400:01:20,880 --> 00:01:24,720They acquire the property, but instead of just wholesaling it, they do some minor

2500:01:24,720 --> 00:01:26,960touches on it and then they go and sell it.

2600:01:26,960 --> 00:01:29,440And then what is a rehabber?

2700:01:29,440 --> 00:01:34,800Then a rehabber is someone who acquires the property either directly themselves from the seller

2800:01:34,800 --> 00:01:40,080or from a wholesaler and they flip the property and they sell it at a large market.

2900:01:40,080 --> 00:01:44,400What are the pros and cons of being a wholesaler in today's economy?

3000:01:44,400 --> 00:01:46,000It's interesting you say that.

3100:01:46,000 --> 00:01:50,000There's a lot of new regulations coming to the wholesale industry,

3200:01:50,800 --> 00:01:55,280just because as you know, whenever there's a group of bad people,

3300:01:55,280 --> 00:01:58,000government always gets involved somehow, some way.

3400:01:58,000 --> 00:01:59,040So what are pros?

3500:01:59,040 --> 00:02:01,360Are there any pros to being in a wholesaler?

3600:02:01,360 --> 00:02:06,160I would say the pro to it though is you do have a low barrier of entry,

3700:02:06,160 --> 00:02:10,640so it's not very difficult to go out there and just do some code calls, send out some

3800:02:10,640 --> 00:02:16,240mass text messages, maybe even write letters, and then get someone that's going to want to sell

3900:02:16,240 --> 00:02:19,600their property, and then you just turn around and you sell it to an buyer.

4000:02:19,600 --> 00:02:21,360So there's definitely opportunity.

4100:02:21,360 --> 00:02:23,920What I think I heard is that in today's economy,

4200:02:23,920 --> 00:02:28,480being a wholesaler may be a little bit more difficult because there are new regulations

4300:02:28,480 --> 00:02:30,000being put into place.

4400:02:30,000 --> 00:02:34,800However, it is a low barrier of entry because of the fact you're doing all the work.

4500:02:34,800 --> 00:02:40,480So you're the one out there co-calling, doing mailers, going out trying to find buyers and sellers.

4600:02:40,480 --> 00:02:41,600Is that correct?

4700:02:41,600 --> 00:02:42,400Yes exactly.

4800:02:42,400 --> 00:02:49,040Okay, so then I know you said that a prehaber is basically a step up from a wholesaler.

4900:02:49,040 --> 00:02:54,080So what would be a pro in a con of being a prehaber versus a wholesaler?

5000:02:54,080 --> 00:03:01,120I would say it's a major pro to that just because you can do some minor touches to the property,

5100:03:01,120 --> 00:03:06,960and you can actually get more for the property when selling to another investor that's going to

5200:03:06,960 --> 00:03:09,760then turn around and flip it to get the bigger property.

5300:03:09,760 --> 00:03:14,720So then what do you see a con being at this point in time of doing prehabing?

5400:03:14,720 --> 00:03:18,320A con that I would see is there is still a bit risky just because

5500:03:18,320 --> 00:03:21,040you're having to put some of your own capital into it.

5600:03:21,040 --> 00:03:26,320Also you have to take down the property yourself meaning purchase the property yourself

5700:03:26,320 --> 00:03:31,520so that adds also another level of stress to it.

5800:03:31,520 --> 00:03:36,320And then what would you say are pros and cons of being a rehabber?

5900:03:36,320 --> 00:03:41,760On the pro of being a rehabber would be that you can still get some pretty decent profits

6000:03:41,760 --> 00:03:46,480if you were out there acquiring deals yourself, direct to seller.

6100:03:46,480 --> 00:03:50,720I may understand if you buy from a wholesaler you can still get good deals

6200:03:50,720 --> 00:03:53,040but you're likely going to pay a premium too.

6300:03:53,040 --> 00:03:54,960Now that would be a con of it.

6400:03:54,960 --> 00:03:59,920Also another con is that you don't really know what the market is going to do in this current economy.

6500:03:59,920 --> 00:04:06,080So you could potentially get into a rehab that takes slightly longer than anticipated

6600:04:06,080 --> 00:04:08,640and not get what you thought you was going to get for the property.

6700:04:08,640 --> 00:04:13,920I think I read an article a while back about the cost of lumber is like

6800:04:13,920 --> 00:04:19,360astronomically higher than it was a few years ago the cost of copper and other materials

6900:04:19,360 --> 00:04:20,720that are needed to build houses.

7000:04:20,720 --> 00:04:26,880So would you say that also comes into effect when somebody is actively trying to pursue doing rehab?

7100:04:26,880 --> 00:04:32,960Yes, that all comes into effect just because you have to find the way to maximize your profit as much as possible.

7200:04:32,960 --> 00:04:37,920So all these three active investors, I know you were an actual hostel yourself

7300:04:37,920 --> 00:04:43,840which one would you say is the most easiest versus the most difficult to get into?

7400:04:43,840 --> 00:04:46,640I would say wholesalers the easiest to get into.

7500:04:46,640 --> 00:04:52,800Honestly if you don't care for a lot of high risk and speculation then wholesalers the best one

7600:04:52,800 --> 00:04:57,680that to be in just because let's say if you don't sell the property you just don't sell it.

7700:04:57,680 --> 00:04:59,280There's no consequences to it.

7800:04:59,280 --> 00:05:03,920Wholesalers the easiest which one would you say is the most profitable of the three?

7900:05:03,920 --> 00:05:06,080The most profitable of the three?

8000:05:06,080 --> 00:05:11,520That's tough because some wholesalers are really crushing it over flippers

8100:05:11,520 --> 00:05:15,920but theoretically flipping properties is more lucrative.

8200:05:15,920 --> 00:05:22,400So now that we know what an active investor is and basically to sum it up I would say an active investor

8300:05:22,400 --> 00:05:27,280is somebody who still basically has a job so you don't have an employer per se

8400:05:27,280 --> 00:05:31,200but you're still out there and you're hustling as if you had a job.

8500:05:31,200 --> 00:05:35,200So that's what I've gathered for what you said an active investor is.

8600:05:35,200 --> 00:05:41,040Prehabbing would be like that the soft spot so it's in between the wholesaler and the rehabber

8700:05:41,040 --> 00:05:47,360but the easiest way to get into real estate is wholesalering with the most profitable way

8800:05:47,360 --> 00:05:49,760to do active investing is rehab.

8900:05:49,760 --> 00:05:50,640Exactly.

9000:05:50,640 --> 00:05:54,160So now let's transition to hybrid investor.

9100:05:54,160 --> 00:05:57,040So what is an hybrid investor?

9200:05:57,040 --> 00:06:02,160A hybrid investor is someone who makes their money as an active investor and then they turn around

9300:06:02,160 --> 00:06:05,120and invest it in passive investments.

9400:06:05,120 --> 00:06:09,600So we're going to come back to some examples for hybrid investors but before we get to that

9500:06:09,600 --> 00:06:15,040I want to ask you what is a passive investor so we can connect that bridge.

9600:06:15,040 --> 00:06:21,120So passive investor is the best investor there is simply because at that point

9700:06:21,120 --> 00:06:25,120you're no longer having to actively go out there and work for your money.

9800:06:25,120 --> 00:06:31,440Now you can just invest into a fund or you can invest into a building and it works for you

9900:06:31,440 --> 00:06:32,480and pays you.

10000:06:32,480 --> 00:06:38,400So that is the end goal when you get into real estate you want to become a passive investor.

10100:06:38,400 --> 00:06:43,680So you may start off as an active investor and it is recommended for it.

10200:06:43,680 --> 00:06:48,960It is recommended but let's say habitetically you you're like a doctor or let's say you

10300:06:48,960 --> 00:06:53,760have a business that you're already successful at that you don't have to start that way.

10400:06:53,760 --> 00:06:56,000You can just go straight into being a passive investor.

10500:06:56,000 --> 00:07:01,200But if you want to do passive investor in terms of let's say hybrid lender would you say you

10600:07:01,200 --> 00:07:04,080need to have active investor experience?

10700:07:04,080 --> 00:07:10,560Yes and no because if you plan on actively lending it to investors then yes you want to be knowledgeable

10800:07:10,560 --> 00:07:15,280of the asset that they're investing in but you can always there's a number of funds out there

10900:07:15,280 --> 00:07:19,120that do passive lending that you could just invest your money with them and let them

11000:07:19,120 --> 00:07:22,480handle it for you and you just collect profit.

11100:07:22,480 --> 00:07:28,800Okay so now that we know what a passive investor is what would be an example of a hybrid investor?

11200:07:28,800 --> 00:07:34,960So an example of a hybrid investors like I said earlier someone who's they've been actively

11300:07:34,960 --> 00:07:41,840investing for a while and they simultaneously still seek out deals themselves so for example

11400:07:41,840 --> 00:07:47,920it'll be someone that seeks flips they still do flips but then they take the cash that they make

11500:07:47,920 --> 00:07:53,680from the flips and they lend it out to other flippers to make money off of their flips too

11600:07:53,680 --> 00:07:55,840essentially so that's a hybrid investor.

11700:07:55,840 --> 00:08:01,200What a hybrid investor also be somebody who's like on active side they're the rehabber

11800:08:01,200 --> 00:08:07,520but once they finish the property you know doing all the construction work and all the renovations

11900:08:07,520 --> 00:08:13,920they hold the property so would they be considered passive because they're not selling their property

12000:08:13,920 --> 00:08:19,520immediately maybe they make it a rental and they make cash flow from that would I be considered

12100:08:19,520 --> 00:08:21,600like a hybrid investor as well?

12200:08:21,600 --> 00:08:25,360Not technically because they actively had to go out there and find the deal they

12300:08:25,360 --> 00:08:29,440actively put the work in and so they're actively managing the property.

12400:08:29,440 --> 00:08:32,880You're really a passive investor when you no longer have to do any of that.

12500:08:32,880 --> 00:08:36,480My question was more so is that considered a hybrid investor?

12600:08:36,480 --> 00:08:39,440Well yes you could consider that a hybrid investor.

12700:08:39,440 --> 00:08:45,120Can give us another example one that I'm thinking about you can just tell me if I'm on the right path.

12800:08:45,120 --> 00:08:52,800What a hybrid investor we let's say somebody has their foot in wholesaling but then they hear about

12900:08:52,800 --> 00:08:58,560let's say a multi-family opportunity where they can put money into a fund and get passive income.

13000:08:58,560 --> 00:09:03,680Would that be considered a hybrid investor because they're still actively finding deals in wholesaling

13100:09:03,680 --> 00:09:08,400but they are now collecting money from the passive side because they put their money into multi-family.

13200:09:08,400 --> 00:09:10,480Yes that is considered a hybrid investor.

13300:09:10,480 --> 00:09:15,200Let's talk about the pros and cons of being a passive investor.

13400:09:15,200 --> 00:09:18,960So the pros of being a passive investor is that you get to live your life.

13500:09:18,960 --> 00:09:25,040You have complete financial freedom. You can travel the world. Do as you please and actually have more money

13600:09:25,040 --> 00:09:26,720than what you had before you left.

13700:09:26,720 --> 00:09:34,480The con to it is that if you invest with let's say a fund manager or a syndicator or one of those

13800:09:34,480 --> 00:09:39,200people who's going to be or let's like a house flipper that don't really know what they're doing

13900:09:39,200 --> 00:09:44,080then you can lose money and you don't have much say so and how much you actually lost.

14000:09:44,080 --> 00:09:50,880So that is more trusting like being a passive investor you have to trust them and you have to really

14100:09:50,880 --> 00:09:53,520know their track record if you're going to invest with them.

14200:09:53,520 --> 00:09:58,160So what would you say are some things to look for in a passive investor to know their

14300:09:58,160 --> 00:09:59,120trust whether you're not?

14400:09:59,120 --> 00:10:03,840Well as a passive investor one thing you want to look for for someone that's managing your money

14500:10:03,840 --> 00:10:07,040is their track record how long have they been doing it?

14600:10:07,040 --> 00:10:09,040How successful have they been?

14700:10:09,040 --> 00:10:12,880That's a key part because just because someone's been doing something a long time doesn't mean

14800:10:12,880 --> 00:10:17,920that they're successful at it also if they're new are they connected with someone that's more

14900:10:17,920 --> 00:10:18,920experienced.

15000:10:18,920 --> 00:10:21,600So that's another thing that you want to look at as well.

15100:10:21,600 --> 00:10:27,680So in today's podcast we talked about the types of active investors we talked about hybrid

15200:10:27,680 --> 00:10:33,200investors and we talked about passive investors and I think this is one of those conversations

15300:10:33,200 --> 00:10:39,680that's not really a lengthy conversation but it is a discussion starter so with that being said

15400:10:39,680 --> 00:10:42,800is there anything you'll show you want to add to the conversation?

15500:10:42,800 --> 00:10:45,760No there's not really much else I would like to add to it.

15600:10:45,760 --> 00:10:51,600I think we pretty much recovered everything as far as passive active hybrid so yeah there's

15700:10:51,600 --> 00:10:52,720not much else.

15800:10:52,720 --> 00:10:59,920So my last question then is because you were an active investor in host selling and now you have

15900:10:59,920 --> 00:11:05,920completely gotten rid of that side and gone into passive investing with multi-family.

16000:11:05,920 --> 00:11:11,920What would you say is the biggest aha moment for you with transitioning from being an active

16100:11:11,920 --> 00:11:14,280investor to a passive investor?

16200:11:14,280 --> 00:11:20,160The biggest aha moment for me well one your tax bill is not the same.

16300:11:20,160 --> 00:11:27,240Also when I was actively host selling like every single day was hustle hustle hustle and

16400:11:27,240 --> 00:11:29,720just cold car get cursed out.

16500:11:29,720 --> 00:11:35,280I mean it's just because you're dealing with not as sophisticated of clients when you're

16600:11:35,280 --> 00:11:40,480an active investor in single family and then as a passive so now switching over into

16700:11:40,480 --> 00:11:45,840more passive you're dealing with more sophisticated investors and sellers so the stress levels

16800:11:45,840 --> 00:11:51,360do go down there's less disrespect also just is more lucrative quite frankly.

16900:11:51,360 --> 00:11:57,040So it's more lucrative but in terms of getting your check would you say the process is longer

17000:11:57,040 --> 00:11:58,960or shorter versus host selling?

17100:11:58,960 --> 00:12:05,160I would definitely say it's longer it is longer but once they start to flow in then it's

17200:12:05,160 --> 00:12:09,280pretty much simple from there you can pretty much like I said you have complete financial

17300:12:09,280 --> 00:12:13,840freedom at that point because now you receive in cash flow you receive in asset management

17400:12:13,840 --> 00:12:18,120fees so it takes a little bit longer but it pays better.

17500:12:18,120 --> 00:12:23,680All right so there you have it today you learned about active investors hybrid investors

17600:12:23,680 --> 00:12:25,600and passive investors.

17700:12:25,600 --> 00:12:31,420I hope you have been able to see the correlation as to how this all pans out in the real estate

17800:12:31,420 --> 00:12:36,600world what's usually the starting point and what's usually the end goal if you do decide

17900:12:36,600 --> 00:12:42,200that real estate is the investment vehicle that you want to invest in so that is all I have

18000:12:42,200 --> 00:12:46,680today I want to thank you again Joseph have been on the podcast if this is your first

18100:12:46,680 --> 00:12:52,040time listening please subscribe share this episode with anyone you know that may benefit

18200:12:52,040 --> 00:12:55,480from it and until next time I will talk to you later.

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