Real estate investing has long been considered a lucrative way to generate passive income. However, there are many ways to invest in real estate; not all can be regarded as passive. In fact, many real estate investments require significant time and energy, making investors question if they can even be considered passive investments.

Generally speaking, real estate investing involves acquiring, owning, managing, renting, or selling real estate to generate a profit. See the structure of a private placement (syndication) deal to learn more. 

There are many ways to invest in real estate. Some investors purchase residential properties like houses and small multi-unit buildings with less than four units. (duplex, triplex); others purchase commercial properties like office buildings, larger apartment buildings, and retail spaces. Meanwhile, some investors purchase industrial properties like warehouses, manufacturing facilities, or even vacant land to develop. [1]

Real estate investors typically aim to make money through rental income, appreciation of property value over time, or a combination of both.

However, there are also several possible approaches to real estate investing beyond the property type. Some investors focus on buying properties and renting them out to residents or tenants to generate a steady stream of rental income. Others engage in “flipping,” where they purchase properties, renovate or improve them, and then sell them at a higher price.

Owning investment properties can help investors build wealth, diversify their investment portfolios, increase their income, and grow their capital. Different investment strategies have various levels of involvement, and they may range from truly passive to somewhat time-consuming. [1]

Here, we will discuss earning passive income through real estate investing.

 

WHAT IS PASSIVE INCOME?

First, we will briefly discuss what passive income means. Passive income refers to earnings generated with minimal effort or active involvement after investing time, money, or resources. Some sources of passive income may require a lot of work to begin with, but they eventually earn money while the investor sleeps. [2]

Unlike active income earned through traditional employment, where you exchange time for money, passive income streams continue to flow even when you’re not directly working on them.

These can include rental properties, royalties from books or music, dividends from other investment vehicles, affiliate marketing, creating and selling digital products, or income from online businesses. The allure of passive income lies in its potential to create a more flexible lifestyle. It allows investors to supplement their primary income or even achieve financial independence by building revenue streams that require less ongoing maintenance.

Regarding wealth building, personal income is considered an excellent tool. Most people would welcome additional income as it can provide many benefits. Additional income makes it possible to build wealth faster. It may even serve as a backup plan if someone loses their day job. [2]

Investors often seek passive income as it offers a consistent stream of earnings with minimal ongoing effort or direct involvement. With passive income, investors can diversify their revenue sources, reducing reliance on active work or a single source of income.

Many possible passive income sources exist, such as dividends or interest from public securities. But is real estate one of them?

 

IS REAL ESTATE INVESTING CONSIDERED PASSIVE INCOME?

Real estate investing can be considered passive income, depending on the investment strategy. However, real estate investing strategies have varying levels of involvement.

Rental properties, for instance, can generate passive income from their residents/tenants. Real estate investors buy and rent out residential or commercial real estate to enjoy a steady income stream. This revenue stream can provide stable income, which is perfect for investors looking for an alternative source of income besides their traditional investment securities. [1]

Direct ownership of real estate can be perceived as a hybrid form of income, combining elements of both passive and active investments. It is not usually categorized as purely passive income despite its ability to generate substantial returns because it generally demands active involvement. Locating properties, conducting market research, negotiating deals, arranging financing, and managing renovations or property improvements require significant time, effort, and expertise.

Unlike other passive income streams (dividends from other investment options, interest from savings accounts, etc.), real estate often demands active participation, especially during the acquisition and setup stages. Even when the rental property is ready for residents/tenants, it still requires ongoing management. This is what blurs the line between passive and active income. This involvement can be considerably more intensive than other forms of passive income, where the investor has minimal to no participation in the daily operations. [1]

Finally, the level of control and decision-making involved in real estate investing can be substantial. Investors often need to make strategic decisions regarding property improvement, rental rates, resident/tenant selection, and when to buy or sell properties. Real estate investment through REITs is generally more passive. Investors buy shares in a trust that owns and manages income-producing properties. The management team handles property operations, rent collection, and property maintenance, allowing investors to earn dividends without direct involvement in property management.

So, while real estate investment can provide passive income, the level of passivity often depends on the investment approach and degree of involvement the investor decides to have in the management and operations of the properties.

 

THE CHALLENGES OF BEING A LANDLORD

Being a landlord comes with many challenges, making the role quite demanding. Owning a rental property means taking on all the responsibilities of that title.

The responsibility of managing properties involves a diverse set of tasks. This includes property maintenance, addressing resident/tenant concerns, ensuring legal compliance, collecting rent, and dealing with unforeseen emergencies. Landlords often wear multiple hats.

Each of these tasks requires time, effort, and professional expertise. You must navigate legal complexities, understand resident/tenant rights, and manage the property’s finances.

The relationship between landlords and residents/tenants can also be complex. While most residents/tenants are responsible and respectful, conflicts can arise over rental payments, property damages, or differing expectations. Resolving these conflicts requires effective communication, negotiation skills, and sometimes legal intervention.

Part of being a landlord is choosing your residents/tenants wisely. To avoid the vacancy risk, which may impact your cash flow, you must avoid problem residents/tenants. A bad resident/tenant can be a financial drain and a headache. Some residents/tenants don’t pay on time or pay at all, which could lead to a lengthy eviction process. Others may damage the property, fail to report maintenance issues, or host extra roommates. [3]

All of these can be emotionally taxing. So, while the property generates income, being a landlord does not really feel like having a passive investment.

This is why many real estate investors seek truly passive alternatives—investments that do not drain your time, money, or energy. Some investors go for REITs, but accredited investors have a more exclusive option: multifamily private placement (syndication).

 

REAL ESTATE INVESTING ALTERNATIVE: MULTIFAMILY PRIVATE PLACEMENT (SYNDICATION)

One alternative for investors interested in real estate but who do not want to manage the property themselves is real estate syndication, particularly multifamily private placement. This investment allows investors to enjoy the benefits of an investment property without all the work that usually comes with it. Real estate investors can enjoy cash flow, tax breaks, and appreciation, depending on the deal structure, without becoming landlords. [4]

Real estate private placement, or syndication, is an investment strategy wherein multiple investors pool their financial resources to invest in a single real estate property or portfolio of properties. This approach allows investors to participate in much larger real estate deals than they usually would be able to as a lone investor.

A syndication deal involves a sponsor identifying, acquiring, and managing the property while investors contribute capital.

The real estate owner/operator, syndicator, or general partner takes on the responsibilities of the investment. They are responsible for underwriting the deal, completing due diligence on the property, arranging the financing, building and executing the business plan, and working with investors looking to participate. The syndicator oversees all aspects of property management once the acquisition is complete. [4]

The syndicator will form a legal entity, often a limited liability company (LLC) or a limited partnership, where investors become shareholders or limited partners.

The investor’s role is only to provide a portion of the capital needed to acquire the property. In exchange, they generally own shares in the entity that owns the property, proportional to their contribution. This is a true passive real estate investment because the investors have no responsibilities beyond their capital contribution and associated fees.

Passive investors may receive passive income distributions from the asset, depending on the deal’s structure. These distributions may be made on a monthly or quarterly basis. The profit split, if applicable, will be detailed in the private placement memorandum (PPM) or the syndication agreement, which investors should review before participating in the syndication deal. [4]

While syndications can be done with almost any real estate property, multifamily syndication is the most popular version for several reasons. For example, most multifamily properties, such as commercial apartment communities, are much more expensive than single-family properties. They are larger and hold multiple units, so these properties are generally too expensive for a lone investor to acquire. However, through multifamily syndication, these investment properties become more accessible. [5]

This collective approach can also spread risk across multiple investors and properties, providing a more diversified investment portfolio.

Multifamily syndication is an excellent strategy for building wealth through passive income generation. Multifamily real estate properties can have several units, producing a strong and consistent cash flow. The monthly income is less impacted even if one or two units become vacant. Compare this with single-family properties that stop generating income when they become vacant. Multifamily syndication is associated with a generally higher yield on investment, making it an attractive option for passive investors. [5]

Syndication deals are also managed by experienced professionals responsible for property operations, maintenance, resident/tenant issues, and property enhancements. The syndicator will either take care of property management themselves or hire a third-party property management company. In any case, investors do not have to worry about the day-to-day operations of the apartment community.

This passive involvement appeals to those seeking a hands-off investment opportunity while reaping the benefits of real estate.

Keep in mind that each syndication deal is different. You must still perform your due diligence and analyze each deal carefully before participating. Working with a syndicator that you trust is critical.

 

CONNECT WITH AN INSTITUTIONAL REAL ESTATE OWNER/OPERATOR 

Real estate investing offers many ways to earn passive income and grow your capital. But if you do not want to take on the role of landlord and handle the responsibilities that come with it, then multifamily syndication could be an ideal investment strategy for you.

Take note that most of these deals are exclusive to accredited investors. As you may know, real estate investments are generally illiquid, which also applies to multifamily properties. It is hard to access your funds once invested in a syndication, meaning accredited investors must be comfortable with that level of illiquidity when participating in a syndication. Compared to non-accredited investors, they generally have the income and net worth to protect them from the risks of multifamily syndication. After all, no investment is entirely risk-free. Learn how to become an accredited investor. 

Multifamily syndication is generally considered a comparatively low-risk option regarding real estate investment opportunities. But if you want the chance to lower your risk, work with a trustworthy owner/operator (syndicator).

Working with a trusted syndicator is essential because, as this is a passive investment, they will make all the decisions regarding the investment property.

BAM Capital prioritizes accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital’s investment strategy creates forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.[6]

Remember that no investment is without risk. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.

© 2025 Bam Capital. All rights reserved.

 

SOURCES:

[1]: Investopedia. (2024). “Investment Real Estate: Meaning, Benefits, Risks.” https://www.investopedia.com/terms/i/investmentrealestate.asp

[2]: CFI. (n.d.). “Passive Income.” https://corporatefinanceinstitute.com/resources/accounting/passive-income/ 

[3]: Investopedia. (2024). “Is Real Estate Investing Safe?” https://www.investopedia.com/articles/investing/122415/why-real-estate-risky-investment.asp 

[4]: Forbes. (2021). “A Guide To Investing In Real Estate Syndications.” https://www.forbes.com/councils/forbesbizcouncil/2021/10/26/a-guide-to-investing-in-real-estate-syndications/ 

[5]: Insights Success. (n.d.). “Pros and Cons of Real Estate Syndication.” https://insightssuccess.com/pros-and-cons-of-real-estate-syndication/ 

[6]: BAM Capital. (n.d.). “Current Portfolio.” https://capital.thebamcompanies.com