Table of Contents

What is passive real estate investing?

Active vs. passive investing in real estate 

4 types of passive real estate investing 

4 Potential benefits of passive real estate investing

4 Risks of passive real estate investing

The bottom line

LearnPassive InvestingWhat Is Passive Real Estate Investing & How Does It Work?

What Is Passive Real Estate Investing & How Does It Work?

Aug 11, 2022


6 min read

Passive real estate investing is a hands-off approach that can help diversify a portfolio. There are several ways to invest in this asset class, learn more about it.

Passive real estate investing offers a hands-off approach to earning money. Instead of flipping a fixer-upper or managing a property full time, a passive real estate investor only contributes money upfront and lets others grow the investment.

What is passive real estate investing?

Passive real estate investing is a strategy in which an investor contributes capital to a real estate investment and another professional manages it. This allows investors to earn extra income without doing physical labor, acting as a landlord, or even buying property in some cases. Some examples of passive real estate investments include purchasing stocks in real estate funds or real estate-related businesses, purchasing shares in real estate investment trusts (REITs), getting involved with real estate crowdfunding, or buying a rental property. 

Active vs. passive investing in real estate 

The key difference between active and passive real estate investing is the level of work involved. Active real estate investments come with more responsibilities, so investors work directly in the construction, development, management, or renovation of commercial and residential properties. 

Passive income typically refers to income that's somewhat automated, so the investor isn't directly managing the investment. Passive real estate investors automate their earnings by contributing capital upfront and letting others make decisions or handle the day-to-day tasks of growing the investment. While passive investors have less control compared to active investors, they may not need much operational experience to get started. 

Take a look at one example to see the difference between the two types of investing. An active investor may, for instance, buy a single-family home and take care of everything from screening tenants to collecting rent, doing repairs, and replacing appliances as needed. The passive investor may also buy a property but would hire a company to manage the daily details. 

4 types of passive real estate investing 

There are several options when it comes to passive real estate investments, and most fall into the following four categories.

  1. Real estate investment trust (REIT)

A real estate investment trust, or REIT, is a company that owns income-producing real estate such as shopping malls, office buildings, hotels, and apartments. Each REIT usually focuses on a specific property type, but some hold multiple properties in their portfolios. These companies are traded like stocks, so investors can buy and sell shares of them on major stock exchanges. REITs must pay out at least 90% of their taxable income to their shareholders in the form of dividends. 

REITs make it possible to earn money from real estate without having to buy physical property and pay a mortgage. According to the FTSE NAREIT All Equity REIT Index, REITs outperformed the S&P 500 between 1972 and 2019, with total annual returns of 13.3% and 12.1% respectively. 

  1. Real estate fund

A real estate fund is a type of mutual fund that invests in publicly traded securities, such as REITs and real estate operating companies (REOCs). REOCs operate like REITs but have more flexibility in how they invest and distribute earnings. Real estate funds tend to be more diversified than REITs because they invest in many types of properties. (While it’s possible for REITs to invest in multiple types of property, it’s much more common for REOCs to do this.) 

Investors can buy shares of a fund by using a brokerage, and can choose between an actively managed fund, in which a manager chooses the investments, or one that's passively managed, in which the fund tracks the performance of a benchmark index, like the Dow Jones U.S. Real Estate Index. Instead of providing income through dividends, real estate funds aim to gain value through appreciation. 

At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.

Get Started

  1. Real estate crowdfunding

With real estate crowdfunding, multiple investors pool their money using an online platform and take on larger projects than they could afford or manage on their own. The lead developer funds ventures such as housing developments and retail space, or they give investors partial ownership in a share of existing holdings. 

These investments may be illiquid unless the platform offers some form of early redemption. However, crowdfunding platforms may provide better returns compared to some publicly traded REITs. One platform, Fundrise, posted an average income return of 5.42% for clients between 2017 and early 2022, while publicly traded REITs returned 4.34%. 

  1. Rental property

Passive investors can also buy rental properties and hire on-site management companies to handle the everyday upkeep. Creating lease agreements, collecting rent, paying property-related bills, maintaining the exterior, and fielding tenant requests are some of the tasks a management company handles. 

This method of passive investing offers more control compared to REITs and real estate funds, and tracking the property remotely makes it easier to invest in high-demand rental markets without living in the area. However, the passive investor will still need to do some active work at the outset to source a property to purchase. There’s also a higher barrier to entry in this form of real estate investing: the down payment and closing costs, plus ongoing expenses in the form of maintenance, repairs, and property management fees.

4 Potential benefits of passive real estate investing

  1. You don't need extensive knowledge.

    Passive real estate investors need to research any type of fund, REIT, or rental property before diving in. But after that point, they'll hand the reins over to another professional and leverage their experience. 

  2. Investment diversification.

    Diversification is a method of spreading money across different assets to reduce the risk of losing principal. A real estate investment may diversify a portfolio that focuses on other asset classes such as stocks and bonds. 

  3. Potentially short time commitment.

    Some passive real estate investments, such as REITs and real estate funds, are a way to gain exposure to the real estate asset class without the time commitment required when buying property. They can also be liquidated much more quickly than property.

  4. Potentially low entry costs.

    Investors can start passively investing in real estate without much money, typically by purchasing a few shares in a REIT or other real estate stock. Crowdfunding investments may also have low buy-ins.

4 Risks of passive real estate investing

  1. Unpredictable.

    Real estate values tend to rise over time, but they go through peaks and valleys like any other investment. Because these investments are ultimately tied to the value of real estate, investors may lose money if property values depreciate. 

  2. Low liquidity.

    An investor who buys a rental unit will need several weeks or months to sell the property, making this type of investment less liquid than stocks and bonds. Investors may also lose money if they need to sell when the market is on a downswing. Crowdfunding investments are usually illiquid, too. 

  3. Expenses.

    A property owner is on the hook for repairs and maintenance costs, which can eat into their earnings. Likewise, trading shares in a REIT or real estate fund may incur management fees. Equity mutual funds typically charge 0.5% of total assets, and they may be higher for funds that specialize in a specific sector, like real estate. REITs charge fees that typically total 0.5% of all trust assets, plus other expense charges.

  4. Less control.

    Passive investing requires someone else to handle decisions. A fund manager decides which securities to buy, while a property manager takes care of a piece of property. There’s always a chance the professional could do a poor job.

The bottom line

Passive real estate investing is a hands-off approach that can help diversify a portfolio. There are several ways to invest in this asset class, and the major ones include REITs, real estate funds, crowdfunding, and rental properties, each with their own set of pros and cons.


Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.

Three Things, a newsletter from Titan

Stay informed on the most impactful business and financial news with analysis from our team.

You might also like

What to Know About Passive Investing Strategies

Passive investors use a strategy that’s relatively simple. Passive investing’s core principle is that, over time, the market’s rise will provide gains for those who wait.

Read More

Cash Management

Smart Cash

Smart Cash FAQs

Cash Options

Get Smart Cash


© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.

Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.

Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.

The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit for applicable terms and conditions and important disclosures.

Cryptocurrency advisory services are provided by Titan.

Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.

Contact Titan at 508 LaGuardia Place NY, NY 10012.