5 Tips To Picking The Right Investing Strategy
The hardest part of starting anything is taking the first step. If you are reading this you have probably committed to investing in real estate but aren’t quite sure how to do it. You may know some of the various options but are nervous to commit to anything. This is a natural reaction and all part of the process. Picking an investing strategy is something you shouldn’t take lightly. Without a firm strategy in place it is easy to get pulled in several different directions. You will go from deal to deal without ever making an offer. On the flip side having a dedicated strategy gives you a vision for how you want your business to go and a partial roadmap for how to get there. Regardless of where you are in your business the right strategy can help your business grow. Here are five tips in picking the right strategy for you.
- Write Down Goals. What do you want out of the real estate business? Saying that you want to buy real estate is not enough. The real estate business is full of options. Before you can figure out a strategy you need to have some goals in place. How quickly are you looking to see a return on your investment? Do you want the quick turnaround that rehabs and flips offer? Are you comfortable parking your money in a rental property for several years? There is no right or wrong answer only what you desire. Once you know your goals it will lead you to your investing strategy. It will give you a better idea of price points, markets, property types and exit strategies. The first step in nailing down a strategy starts with your real estate goals.
- Available Capital. Your available capital and your goals often go hand and hand. As your strategy begins to come into focus you need to take inventory on how much capital you have or how much you have access to. Whatever your number is will give you an idea of what you can realistically do. If you have the ability to pay cash for a property it will change the types of deals you pursue. If you are reliant on hard or private money lenders you are more likely to want to turn the property over as quickly as possible. If you are using lender financing you can comfortably hold the property for the long term. There are different investing options for every budget and every amount of capital. Your strategy is often based on how much capital you have, how much you want to spend and how quickly you want to see a return.
- Understand Your Options. There are several different ways to invest in real estate. What works for someone else may not be the best fit for you. As you are developing your strategy you need to know and understand all your different options. Most investors are still focusing on short sales, foreclosures and REO properties. There is nothing wrong with this approach but there are more options out there. Start by figuring out what type of homeowners you want to speak with. Are you looking to deal with banks or traditional homeowners who may need your help? From there you can focus on the types of properties you are interested in. How many units are you looking for? Is there a particular market that you are looking for? Are condos, mobile homes and townhouses something you would pursue? Read as much information as you can about the business. Go to real estate investment clubs and local networking groups. You never know when you will hear an idea that grabs your attention. Always keep your ears open and understand all of your options.
- Create Your Own Niche. When figuring out a strategy you want to come up with something that is unique to you. There is nothing wrong with following the steps of successful investors but you also want to create your own path. Over the past few years there has been an increase of investors to the business. This demand has made certain niches more popular than others. This demand has pushed prices higher and made some deals less attractive. Instead of being one of many chasing a property you should look at niches that you can be a leader in. There is no niche that you can’t pursue. Between fsbo properties, recently divorced owners and absentee landlords there is a niche for any style of investor. As long as your niche is interesting to you go for it.
- Pick A Strategy That Excites You. One of the most common goals that people have is to find employment that they are passionate about. The same should be the case with your real estate career. You want to find a strategy that excites you. Regardless of the popularity if you are not excited about finding deals eventually you will stop. Conversely if you find a niche or a strategy that you are passionate about you will wake up every morning hungry to find deals. This is the most important part of your strategy. You need to be able to apply what you have on paper to how you run your business. Develop a strategy that you can see yourself enjoying every day.
Your investing strategy is a blueprint for how you want your business to go. You should access it every six months or so and make sure you are on the right path. It is important to remember that what works for someone else may not work for you. Find a strategy that fits with you and your personality.