12 Real Estate Investments Ranked by Passivity

You may know that there are many different ways to invest in real estate. From buying your first home to investing without buying property, you have lots of options.

One of the key factors in choosing the right investment strategy for you is activity vs. passivity: How much time, effort, and energy do you want to put into the project? Do you want to tackle a hands-on project? Or do you want to outsource the management of the project to professionals so you can focus on other ventures?

There’s no right or wrong answer. Both passive and active real estate investments have potential for strong returns. It’s all about your bandwidth and personal goals. 

So, in this article, we’re ranking 12 popular real estate investment models from most passive to least passive. And we’ll provide the information you need to decide which models work best for you.

REITs (Real Estate Investment Trusts) may be the single most passive way to invest in real estate. 

REITs are companies that own and operate income-producing real property assets (often large apartment complexes, commercial real estate, and industrial spaces). Because REITs own multiple properties, your investment is automatically diversified across several assets. 

You can invest by purchasing shares in a REIT. This entitles you to a portion of the portfolio’s income, typically paid out as quarterly dividends. 

REITs can be publicly traded or private. Publicly traded REITs are sold on stock exchanges, so they’re easy to access, fairly liquid, and typically have low minimum investment amounts. Private REITs require industry connections and typically have longer holding periods and higher investment minimums. 

Involvement required:

You simply need to research REITs, choose one or more based on performance and expectations, and purchase your shares. 

Possible downsides:

You have zero control over which properties are held in your REIT portfolio(s). Because figures are often reported on a portfolio-wide basis, it may be difficult to identify underperformers. And even if you did, the only way to ditch them would be to sell your shares in the entire portfolio.     

Passivity Index: Very High

Return Potential: High

Real estate ETFs (exchange-traded funds) are baskets of stocks and bonds in real estate companies that can be purchased on the stock exchange. Like REITs, these investments are highly accessible, fairly liquid, and offer low investment minimums. 

Real Estate ETFs provide greater diversification than REITs because a single share may contain investments in dozens, or even hundreds of companies (some of which are REITs, with all the properties they own).

Involvement required:

You simply research available ETFs, choose one or more, and purchase your shares. The research may be slightly more involved than with REITs, particularly if you want to look into the companies represented by each ETF. 

Possible downsides:

You have no control over the companies represented by the ETF, let alone the assets each company owns. Furthermore, because ETFs don’t have the same dividend payout requirements as REITs, the returns are often lower.    

Passivity Index: Very High

Return Potential: Moderate

Real estate crowdfunding and syndication are commonly grouped together because they both involve pooling funds from multiple investors to finance a specific real estate project (which could be anything from a rental property to a ground-up multi-family development). This project is pre-vetted and professionally managed by a real estate sponsor, who takes care of every detail on behalf of the investors.  

There are a few differences between crowdfunding and syndication, notably the ownership structure. With syndication, you become a member of the LLC that owns the property, giving you an equity stake in the underlying real estate. 

Crowdfunding and syndication returns are often higher than other real estate investment strategies because sponsors have existing systems, deal sources, and industry connections to minimize risk, reduce costs, and maximize return potential. And because the investment is split among multiple investors, the investment minimum is comparatively low. 

Involvement required:

You simply choose a crowdfunding/syndication platform based on factors like investment minimums and track records, then choose a project from that platform. Many platforms offer deal-by-deal investing, which allows you to hand-select the specific project(s) you want to join. You submit your investment, then track the project’s progress through an online dashboard at your leisure.    

Possible downsides:

Syndication platforms are typically limited to accredited investors. So you would need to meet the SEC’s income or net worth requirements to qualify. This verification process makes crowdfunding and syndication slightly less passive than REITs or ETFs, but once your investment has been placed, it’s every bit as passive as the other models. It’s also worth noting that you typically have to commit your funds to the duration of the project, so check timelines to make sure they align with your objectives.  

Passivity Index: Very High

Return Potential: Very High 

Private equity is essentially the forefather of crowdfunding and syndication. The models work similarly in that you have multiple investors pooling funds for a specific project.  

The key difference is that private equity deals are not marketed to the general public. So you need to have a network of other investors you trust and want to partner with. 

Involvement required:

Private equity requires you to build relationships with other investors. If you already have those relationships, you’ll need to analyze potential deals, which includes a thorough vetting of the deal’s sponsor. However, once your investment is placed, private equity is highly passive. You may need to vote periodically as issues or opportunities arise, but not all private equity deals require input from investors.  

Possible downsides:

Investment minimums can be substantial (often $50,000 or more), and you may have to commit the funds long term. Also, because these deals are private, it may be harder to find information about the project or the sponsor’s track record, making this riskier than crowdfunding or syndication.

Passivity Index: High

Return Potential: High 

Real estate note investing involves carrying the mortgage note for a property owner. 

Notes can be bought and sold via secondary markets online (including as note bundles, which contain a portfolio of notes), but you can often find better deals working directly with local banks, lenders, and homebuyers. 

Seller carry-back financing is a common method of one-on-one note investing. If you’re selling a property, you might offer to carry the note for the homebuyer, effectively making you the lender. Rather than paying the bank, the buyer pays you each month, providing passive income.   

Involvement required:

You need to do the research to find notes to purchase and place your investment. If you’re investing in a note fund, your returns are passive from that point. However, if you’re investing one-on-one, you need to collect your payments as scheduled. In the unlikely event that your borrower fails to repay the note as scheduled, you are legally allowed to foreclose on the mortgage, evict the borrower, and claim possession of the property. From there, you can find another buyer, convert the property to a rental, or move in yourself, depending on the circumstances.

Possible downsides:

Note funds offer low transparency, while one-on-one notes provide more control, but are riskier. If your one-on-one borrower fails to repay the loan, your highly passive investment suddenly becomes much more active as you seize possession and redirect the property.

Passivity Index: High

Return Potential: Moderate 

In 22 states across the US, unpaid property taxes are auctioned off to investors as tax liens. Investors bid down the interest rate, with the lowest bidder paying the back due taxes in exchange for a lien against the property (meaning the owner can’t sell or refinance until that amount is repaid with interest).  

If the property owner fails to repay the debt (which is rare), the investor can seize possession of the property. However, the owner may have a right to redeem the property by repaying the debt within the “redemption period” (of six months to four years, depending on the state). At the end of the redemption period, the investor owns the property free and clear and can sell it or rent it out as they like.

Involvement required:

Tax lien auctions are county-specific, so you need to find out how your target counties work. Auctions may be held online or in person. You’ll want to do some due diligence to confirm the basic viability of the investment (like a wide margin between the lien amount and the property’s estimated value). Then you simply collect your payment. However, if the lien is not repaid, this becomes an active investment, requiring you to take possession and reposition the property.  

Possible downsides:

Investors typically have no right to inspect the property before bidding on the lien. In the unlikely event that you are forced to take possession of the property, you have no idea what kind of condition it may be in. It is wise to assume some deferred maintenance, as the owner likely did not have the funds to properly maintain the building and grounds.   

Passivity Index: High

Return Potential: Moderate 

Professionally managed turn-key rentals are rent-ready properties in which the property management is outsourced to local pros. The idea is to eliminate the most time-consuming parts of rental investing, like building or renovating, leasing, and day-to-day management.

The property manager handles rent collection, maintenance coordination, and tenant communication (including renewal or unit turns).

Because you own the property directly, you benefit from rental income, tax advantages, and long-term appreciation, while outsourcing nearly all operations.

Involvement required:

You may need to analyze dozens of potential deals to find one to purchase. Then you need to secure financing (if needed) and close on the property. After the purchase, your involvement is largely limited to reviewing monthly statements, approving larger repairs, and making high-level decisions (rent increases, refinancing, or sale). 

Possible downsides:

Turn-key rentals command a premium, so your purchase price may be higher. Poor renovations, inflated purchase prices, or weak property management can reduce returns. Plus, you remain financially responsible for vacancy losses, maintenance expenses, unexpected repairs, and necessary improvements.

Passivity Index: High

Return Potential: Moderate to High

Self-managed rentals involve owning and operating a rental property without a property manager. You are responsible for all property management tasks, from tenant screening and rent collection to maintenance coordination and legal compliance.

You can rent to long-term tenants or short-term vacationers. Long-term rentals are typically more passive than short-term vacation rentals because they have lower turnover rates. However, short-term rentals generally command higher nightly rates.

Involvement required:

You are responsible for finding and acquiring the property, marketing it, screening tenants/guests, handling leases/bookings, collecting payments, coordinating repairs, responding to issues, and handling the turn process between tenants/guests. 

Possible downsides:

Being a landlord demands time, skill, and knowledge. Vacancies, nonpayment, maintenance emergencies, and regulatory changes directly impact your income. Short-term rentals also face higher wear and tear, seasonality, and regulatory risk.

Passivity Index: Low to Moderate

Return Potential: High

In some states, past-due property taxes result in auctioning off the property to the highest bidder (rather than auctioning off a lien to the lowest bidder as we saw in #6 on this list). In these tax deed states, you can purchase a property outright, often for a fraction of its market value. 

Ownership usually transfers shortly after the auction, subject to any remaining redemption rights or legal challenges allowed by state law. Then you’re free to renovate, tear down and rebuild, rent out, or resell as you like. 

Involvement required:

You need to research state and county tax deed rules, find upcoming auctions, review public records, and evaluate the condition of the property (based on what you can see from the outside). After purchase, you’re responsible for quiet title actions (if needed), securing insurance, addressing code issues, and deciding what to do with the property going forward.

Possible downsides:

Tax deed properties may come with title defects or liens you have to clear as the new owner. These homes are often physically distressed as well, so repair costs can be substantial, and you may have to evict the previous owner. Plus, competition from other investors can quickly increase the purchase price, erasing financial safety margins.

Passivity Index: Very Low

Return Potential: Moderate to High

A fix-and-flip is when you purchase a property at a discount, renovate it, and resell it within a short time frame. Unlike rental strategies, there is no recurring income; profit is realized only once the property sells.

Flipping a house relies heavily on local market knowledge, contractor management, and timing. Because the success of the project depends so much on your involvement, flips are one of the most hands-on real estate investment strategies.

While they’re not for everyone, some investors find flips extremely satisfying. Some have even given up their day jobs to be full-time flippers. Side note: If you like the idea of flipping, but don’t have the time to do it yourself, consider investing in a professionally-managed, crowdfunded flip.

Involvement required:

You have to source deals, estimate rehab costs, secure financing, manage contractors, oversee timelines, handle permits, stage, price, and sell the property. Daily oversight is often required. You may even decide to do some of the renovation work yourself. 

Possible downsides:

Flips are highly sensitive to market shifts. Unexpected repairs, permitting delays, or softening buyer demand can quickly cut into your profits. Your cash is tied up for the duration of the project, and returns are not guaranteed.

Passivity Index: Very Low

Return Potential: Moderate to High

Real estate development is the least passive real estate investment available. It requires active daily management, as well as years of experience. 

Development involves acquiring land or underutilized property and adding value through construction. The completed building can be sold immediately or held as a rental (known as a BTR - built-to-rent).

Real estate developer is a full-time job. Developers coordinate land acquisition, zoning, architectural design, financing, construction, and eventual sale or stabilization. Because value is created rather than acquired, development is an opportunistic investment with some of the highest upside potential in real estate.

It’s worth noting that you can get many of the benefits of development without the high risk or commitment by investing in a syndicated development project.

You are responsible for managing every phase of the project, including feasibility analysis, permitting, lender and investor relationships, contractor oversight, budget management, and risk mitigation. You’re constantly required to make high-stakes decisions.

Possible downsides:

Development is exposed to zoning delays, cost overruns, labor shortages, and market shifts between project start and completion. These projects are complex, and inexperienced developers can easily lose money.

Passivity Index: Very Low

Return Potential: Very High

If you’re looking to balance passivity with high return potential, focus on investing in real estate syndication. 

Well-established syndication companies, like Gatsby Investment, already have the systems in place to take care of every detail of the project for you, while minimizing risk and maximizing return potential. Your only responsibility is to select a pre-vetted real estate opportunity from your chosen syndication platform. 

With average annualized returns of 22.3% to investors since being founded in 2016, Gatsby consistently outperforms the market and shows how profitable passive real estate investing can be!