So you've heard that real estate is one of few investment opportunities that can make you a millionaire. You also know that it is one of the best hedges against inflation.

Did you know there are three ways to become a real estate investor? Hey, everybody. Welcome to the Bill Young, Growow with the podcast.

My name is Willita Shree. In today's podcast episode, my returning guest Joseph and I are going to share what an active, passive, and hybrid investor is. So be sure to stay until the end. Without further ado, let's get into this.

So it is good to have you back on the podcast Tell us how's everything been going? Everything's been going well. Let us talk about an active investor. What is an active investor? An active investor is someone that goes out there, and they have to actively find their own deals to bring value. So there are different types of active investors. We have whole sellers, prehabbers, and rehabbers.

Do you mind telling us what a wholesaler is? So wholesale is someone that goes out and they acquire a property at, let's say, a hundred thousand and then they turn around and look to sell it for about a hundred and ten thousand a person who's gonna then go and slip the property. So then what is a prehabber?

So a prehabber is basically the the next step above a wholesaler They acquired a property, but instead of just wholesaling it, they do some minor touches on it, and then they go and sell it. And then what is a rehabber?

Then a rehabber is someone who acquires the property either directly themselves from the seller or from a wholesaler and they flip the property and they sell it at a large market. What are the pros and the cons of being a wholesaler in today's economy? It's interesting you say that. There's a lot of new regulations coming to the wholesale industry.

Just because as you know, whenever there's a a group of bad people, government always gets involved somehow, some way. So what are our pros? Are there any pros to being in the wholesaler? I would say the pro to it, though.

Is you you do have a low barrier of entry. So it's not very difficult to go out there and just, you know, do some cold calls, send out some mass text messages, maybe even write letters and then get someone that's gonna wanna sell their property, and then you just turn around and you sell it to an buyer. So there's definitely opportunity But I think I heard is that in today's economy, being a wholesaler may be a little bit more difficult because there are new regulations being put into place However, it is a low barrier of entry because of the fact you're doing all the work. So you're the one out there co calling, doing mailers, going out trying to find buyers and sellers.

Is that correct? Yes. Exactly.

Okay. So then I know you said that a prehabber is basically a step up from a wholesaler So what would be a pro in a con event, a prehabber versus a wholesaler? I would say it's a it's a major pro to that just because you can do some some minor touches to the property, and you could actually get more for the property, when selling to, another investor that's gonna then turn around and flip it. To get the bigger profit.

So then what do you see a con being at this point in time of doing prehabbing? A con, I would see is that it's still a bit risky just because you're having to put some of your own capital into it. Also, you have to take down the property yourself, meaning purchase the property yourself. So that adds also another level of, stress to it.

And then what would you say are pros and cons of being a rehabber?

The pro of being a rehabber would be that you can still get some pretty decent profits if you were out there acquiring deals yourself.

Direct to seller. I mean, honestly, if you buy from a wholesaler, you can still get good deals, but you're likely gonna pay a premium too. Now, that will be a kind of it. Also, another con is that you don't really know what the market is gonna do in this current economy.

So you could potentially get into a rehab that takes slightly longer than anticipated and not get what you thought you was gonna get for the property? I think I read an article a while back about the cost of number is, like, astronomically higher than it was a few years ago, the cost of, copper and other materials that are needed to build houses. So would you say that also comes into effect when somebody's actively trying to pursue doing rehabbing? Yes.

That that all comes into effect just because you have to find a way to maximize your profit as much possible. So of these three active investors, I know you were an actual wholesaler yourself. Which one would you say is the most easiest versus the most difficult to get into. I would say wholesale is the easiest to get into.

Honestly, if you don't care for a lot of high risk, in speculation, then wholesaling is the best one that to be in just because let's say if you don't sell the property, you just don't sell it. There's no consequences to it. Wholesalein is the easiest. Which one would you say is the most profitable of the three?

The most profitable of the three. That's tough because some some wholesalers are really crushing it over flippers, but theoretically flipping properties is more lucrative. So now that we know what an active investment is, and basically to sum it up, I would say an active investor is somebody who still basically has a job. So you don't have an employer per se, but you're still out there and your hustling as if you had a job.

So that's what I've gathered for what you said an active investor is. Prehabbing would be like the the soft spot. So it's in between between the wholesaler and the rehabber, but the easiest way to get into real estate is wholesaling, but the most profitable way to do active investing is rehab. Exactly.

So now let's transition to hybrid investor.

So what is an hybrid investor? A hybrid investor is someone who makes their money as a active investor, and then they turn around and they invest it in passive investments.

So we're gonna come back to some examples for hybrid invest But before we get to that, I wanna ask you, what is a passive investor so we can connect that bridge? So passive investor is the best best investor there is simply because at that point, you're no longer having to actively go out there and work for your money. Now you can just invest into a fund or you can invest into a building, and it works for you and pays you. So that is the the end goal when you get into real estate.

You wanna become a passive investor. So you may start off as an active investor, and it is recommended. Correct? It is recommended, but let's say hypothetically you you're like a doctor or let's say you have a business that you already successful at, then you don't have to start that way.

You can just go straight into being a passive investor. But if wanna do passive investor in terms of, let's say, private lender, would you say you need to have active investor experience?

Yes and no because if you plan on actively lending it to investors, then yes, you wanna be knowledgeable of the asset that they're investing in. But you can always there's there's a number of funds out there that do passive lending that you could just invest your money with them and let them handle it for you and you just collect profit. Okay. So now that we know what a passive investor is, what would be an example of a hybrid investor?

So an example of a hybrid investor is like I said earlier, someone who's they've been actively investing for a while, and they simultaneously still seek out deals themselves. So for example, it'll be someone that seeks flips. They still do flips, but then they take the cash that they make from the flips and they lend it out to other flippers to make money off of their flips too, essentially. So that's a hybrid investor.

What a hybrid investor also be somebody who's like active side there, the rehabber, but once they finish the property, you know, doing all the construction work and all of the renovations, they hold the property. So would they be considered passive because they're not selling that property immediately?

Maybe they sent they make it a rental and they make cash for net. Would that be considered, like, an hybrid investor as well? Not technically because they actively had to go out there and find the deal. They actively put the work in and so they're actively managing the property.

You're really a passive investor when you no longer have to do any of that. My question was more so. Is that considered a hybrid investor? Well, yes.

You could consider that a hybrid investor. Can't give us another example. One that I'm thinking about, you can just tell me if I'm on the right path would a hybrid investor be, let's say somebody has their foot in wholesaling, but then they hear about, let's say, a multifamily opportunity where they can put money into a fund and get passive income. Would that be considered a hybrid investor?

Because they're still actively finding deals and wholesaling but they are now collecting money from the Paso side because they put their money into multi family. Yes. That is considered a hybrid investor. Let's talk about the pros and cons of being a passive investor.

So the pros of being a passive investor is that you get to live your life. You have complete financial freedom you can travel the world, do as you please, and actually have more money than what you had before you left. The conduit is that if you invest with, let's say, fund manager or a syndicator or one of those people who's gonna be, or let's, like, a house flipper that don't really know what they're doing, then you can lose money and you don't have much say so and how much you actually lost. So it that is more trusting.

Like being a passive investor, you have to trust them, and you have to really know their track record if you're gonna invest with them. So what would you say are some things to look for, in a passive investor to know if they're trustworthy or not? Well, as a passive investor, One thing you wanna look for for someone that's managing your money is their track record. How long have they been doing it?

How successful have they been? That's a key part. It's just because someone been doing something a long time doesn't mean that they're successful at it. Also, if they're new, are they connected with someone that's more experienced?

So that's another thing that you wanna look at as well. So in today's podcast, we talked about the types of active investors. We talked about hybrid investors, and we talked about passive investors. And I think this is one of those conversations that's not really a lengthy conversation.

But it is a discussion starter. So with that being said, is there anything else you wanna add to the conversation?

No. There's not really much else I would like to add to it. Think we pretty much covered everything as far as passive, active hybrid. So, yeah, that's not much else. So my last question then, is because you were an active investor in wholesaling, and now you have completely gotten rid of that side in gone into passive investing with multifamily.

What would you say is the biggest aha moment for you with transitioning from being an active investor to a passive investor. The biggest aha moment for me, well, one, your tax bill is is not the same. Also, when I was actively wholesaling, like every every single day was hustle, hustle, hustle, hustle, and just cold call, get cursed out, It's just because you're dealing with a not as sophisticated of clients, when you're an active investor in single family. And then as a passive, so now switching over into more passive, you're dealing with more sophisticated investors and sellers.

So the stress levels do go down. There's less disrespect. Also, just it's more lucrative, quite frankly. So it's more lucrative, but in terms of getting your check, would you say the process is longer or shorter versus wholesaling?

I would definitely say it's longer.

It is longer, but once they start to flow in, then it's it's pretty much simple. From there, you can pretty much like I said, you have complete financial freedom at that point because now you're receiving cash flow. You're receiving asset management fees. So it takes a little bit longer, but it pays better. Alright.

So there you have it. Today, you learned about active investors, hybrid investors, and passive investors.

I hope you have been able to see the correlation as to how this all pans out in the real estate world what's usually the starting point or what's usually the end goal. If you do decide that real estate is the investment vehicle that you want to invest in, So that is all I have today. I wanna thank you again, Joseph, for being on the podcast. If this is your first time listening, please subscribe share this episode with anyone you know that may benefit from it. And until next time, I will talk to you later.

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