JF2968: The 3-Step Process to Dollar-Cost Average CRE | Passive Investor Tips ft. Travis Watts

Passive Investor Tips is a weekly series hosted by full-time passive investor and Best Ever Show host, Travis Watts. In each bite-sized episode, Travis breaks down passive investor topics, simplifying the philosophy and mindset while providing tactical, valuable information on how to be a passive investor.

“Feed your investments so one day they can feed you.”

 

In this episode, Travis explains how you can dollar-cost average, compound your investments, and build diversified passive income streams in three steps. 

 

1. Create a new bank account. 

This could be in your own individual name, the name of a trust, or an LLC. Check with your financial advisor to see what makes the most sense for you. The purpose of this bank account is to exclusively hold the real estate that you’re going to be investing in. 

 

2. Fund the account. 

This can be a lump sum that you place in the account on day one, or perhaps you want to move some cash from one account to another after a liquidity event. You could even begin funding the account through your active income. The goal is to save up enough for either the down payment on real estate you plan to purchase or the minimum investment amount if you plan to invest in syndications or private placements. 

 

3. Make an investment that produces passive income or cash flow.

With most syndications or private placements, you will likely have the option to have your cash deposited directly into your bank account. If you purchased your own real estate, you can use different apps and software to directly deposit rent payments into your account on a regular basis as well. 

 

Compounding

Because you now have distributions from your first deal sitting in your bank account, you can use them to invest in a second deal. As you continue to repeat this process moving forward, it gets easier and easier to invest as your cash continues to compound.

 

Dollar-Cost Averaging

This process is considered dollar-cost averaging because if you do one deal per year, for example, the market is likely to change from year to year. Each time you do an investment, you will inevitably buy at a slightly higher or slightly lower price than the deal before. This way, you can dollar-cost average similarly to how it is done with stocks.

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