Which Type Of Investing Is Right For You? (3 Simple Questions To Ask To Zone In On The Low-Hanging Fruit)
I’ve never met a real estate investor who got into investing “just because they felt like it”. Every investor I ever met started investing because they had a goal in life and investing was the tool that allowed them to achieve that goal.
There are many paths you can take as a real estate investor, so which one will allow you to achieve YOUR goals?
What happens is: Some investors try to do too many things at once and end up becoming overwhelmed or overworked. So in this blog post I want to break down the different investing strategies you can pursue and help you get started (or get moving forward if you’re stalled).
THE 3 TYPES OF REAL ESTATE INVESTING
There are 3 basic types of real estate investing strategies. These are the 3 basic strategies, but you can alter these strategies in different ways to create unlimited opportunities.
REHABBING: Rehabbing is when you buy a property, fix it up, and then sell it for more than you bought it. The expenses can be high up-front but the income you get can also be high. The income you earn here is from appreciation (the increase in value of the property).
RENTING: Renting is when you buy a property and put a tenant into the property. The income you earn here is primarily from cash flow (the rental income) but may also be from appreciation if you choose to sell the property in the future.
WHOLESALING: Wholesaling is when you find a great property that someone else would love to own, and you put that property under contract and then sell the contract to someone for a fee. You’re not actually selling the property; rather, you’re selling the right to buy the property. The income you earn is from the wholesale fee.
Of course there are small tweaks you can make to these 3 basic strategies that will create hybrid strategies. For example, rent-to-own is kind of like renting but one where you sell the property to the tenant eventually; or turnkey wholesaling might be thought of as a combination of rehabbing, renting, and wholesaling. There are many others.
WHICH ONE IS RIGHT FOR YOU?
Investors can get excited about all of these opportunities; they may even try to do all three (or the unlimited hybrid opportunities as well). But jumping from one to another to another to another can actually slow you down.
Here are my recommendation:
First, look at your goals and lifestyle. Ask yourself, “what do I love to do?” Your goals and vision for your life will tell you how much money you need and how much time you need. Whether it’s hanging out with your family, paying for your kids to go to college without incurring student debt, golfing across the nation, or buying your dream car… those goals will tell you exactly what you need for money and time.
Second, figure out which type of investing you need to achieve those goals. Ask yourself, “given the goals I want, which investing strategy should I do to achieve those goals?” If you love doing hands-on work and you want to quit your job but keep active, maybe rehabbing is a fit for you. If you live off of a steady flow of income while you and your spouse sit on the beach then an investing strategy that results in cash flow might be your preferred option.
Third, after you’ve chosen one model, perfect it. Ask yourself, “how can I do this better?” Learn the ins and outs of that investing strategy and become proficient at it. (This won’t take long – you’ll feel confident even after a few deals). Figure out how to do it better, build in systems and a team that can help you, and learn to do more of these types of deals. Want a great plan for investing proficiency? Check out my post 16 Strategies To Achieve More Success In 2016.
Once you’ve gained some proficiency and predictability in one of the strategies, brand out to find another strategy that fits with your goals and lifestyle.
SUMMARY
What I love about real estate investing is: There’s so much opportunity to do deals in a way that match your goals and lifestyle. So pick an investing strategy and get started today!