Discover Which Real Estate Niche Is Best For You?
There is no right or wrong way to invest in real estate. There are several different paths and strategies you can follow based on your target area and your individual goals. When most people think of real estate investing they immediately think of rehabs and quick flips. While this is certainly a viable option it is only one of a handful of ways to approach the business. Figuring out which path is for you starts with knowing and understanding every available option. Once you know what is out there you will tend to gravitate to the areas you feel most comfortable with and passionate about. Here are just five of the many investing options available to you.
- Wholesaling. Wholesaling can be a great way to break into the business. One of the things that makes is so great is the limited barrier of entry. Instead of needing ample capital and multiple financing options you can get started on a dime. Wholesaling is the process of putting together sellers with investors looking for a discount. As a wholesaler you basically act as a broker between the two parties. You find discounted deals, get the seller to accept your price and then match that price with an interested buyer. For your efforts you are paid a fee by the investor who agrees to purchase the property. These fees are typically between two and five thousand dollars but each deal is usually on a case by case basis. While you may not hit a grand slam as a wholesaler you can hit several singles throughout the course of the year. You don’t have money tied up in one deal allowing you to quickly move on to the next one. Additionally your risk is far less and your cash outlay reduced. For someone just breaking into the business wholesaling can be a great way to get started.
- Rehab An Flip. As we mentioned there has been a surge in the popularity of fix and flip investing. You can probably find a home flipping show on TV almost any day of the week. Rehabbing is all about finding good deals, putting the right work in and then selling for a profit. Like any other part of the business this can be easier said than done. There are several steps in the process that must be executed to perfection if you are going to have success. Not only do you need to find good deals but you need to have a great team around you to put your plan into place. It is also important that you put the right work in for the market. Even though anyone can invest in fix and flip real estate it is not advisable to dive right in without properly educating yourself. As successful as your favorite investor may be on TV you can lose money in real estate if you don’t know what you are doing.
- Development/Building. The longer you are in the business the more options that will become available to you. Instead of working on preexisting buildings and structures you can look for properties not yet available to the market. Working as a builder requires a different skill set and base of education but it can be a great way to take your business to a new level. As a builder and developer the potential for greater profits is much higher than with any other part of the business. With the right location and with the right work it is not a stretch to say that you can double or even triple your investment. These deals are not the norm but the potential does exist.
- Single Family Rentals. Owning rental property is a great way to transform your portfolio. Most investors don’t think about five to ten years down the road but it comes much quicker than we like to admit. An investor looking to get started as a landlord should consider a single family rental property. Dealing with tenants is often the biggest adjustment, even if it is just one tenant. With a single family rental your monthly cash flow will be capped but you only have one tenant to deal with. Additionally you only have one set of items to take care of in the property. There is only one dishwasher, washing machine or roof to replace if things don’t go right. A single family rental will give you a good idea if like the concept of being a landlord and if you should explore the option of property management.
- Multifamily & Commercial Investing. If you like the idea of being a landlord and are ready for a new challenge you can increase the number of units you own. You can take the logical next step and explore two to four unit properties. Once you go over four units you cross over into the commercial property classification. With that you can look for apartment buildings, strip malls and mixed use properties. The scope of your work is larger but so are the potential profits. Some of the wealthiest people in the country have made their wealth buying and leasing apartment and commercial buildings. This step usually takes years of contacts and sufficient assets available.
Many successful investors have one niche of the business that they focus on. Always educate yourself and know what other options are out there.