5 Questions That Will Determine Your Real Estate Investment Strategy

Originally posted here, on Northstate Equity's Rags to Riches Real Estate Blog!

When getting started in real estate, it is important that you choose an investment strategy that is right for you. One of the biggest mistakes you can make when starting out is not using your time effectively. There are multiple components that come into play when determining your real estate investment strategy, and it is necessary to consider all of them.

In this article, I will go over five questions that everyone should ask themselves before investing in real estate.

How Much Time do I Have?

Image by?Lukas Bieri?from?Pixabay

To start off, one of the most important things to consider when exploring real estate investing is the amount of time you have available. If you are working a full-time job and have little free time, your options are going to be more limited compared to someone working a part-time job.?

In the event that you have time constraints, it may be best for you to work with someone who can bring the necessary time for a project. Or perhaps you could invest in buy-and-hold rentals, which can be much more passive investments. On the other hand, if you are looking for something to do full-time, then your options will be much wider. Owning short term rentals provide higher return, but requires more time to manage than a traditional rental property. You could also get into flipping or wholesaling, which are both more like full-time jobs and aren’t as passive.?

How Much Money do I Have to Invest?

As a beginner, you may not have a ton of money, and that is totally fine! An absence of money is never an obstacle to beginning your real estate journey. If you are truly determined and willing to put in hard work, there is always a strategic opportunity for you in real estate. Even if you lack the money but have a lot of time, you can partner with someone who has a lot of cash, but may not have the time and vice versa.?

Photo by?Karolina Grabowska

If you are someone that is constrained by time but has a lot of money, then you would probably be better off with a more passive investment strategy. Investing in?syndications?is a popular strategy utilized by high net-worth individuals. Lacking the time to work on a deal from start to finish, but still seeking the financial benefits of investing in real estate, you will be trading higher returns and sole proprietorship for passive income.

My Skill Set, What Is It?

Determine what you’re good at and which skills you possess so you can spend your time doing your most productive work. Figure out where your time is most valuable so you don’t waste it doing something you aren’t good at. If you’re more out-going and possess strong sales skills, it may be best to get started by going directly to sellers and finding great deals yourself. By doing this, you give yourself more opportunity to conduct wholesale deals, flips, and achieve better returns in general.

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Learning how to leverage your skill set is invaluable to investors, and will set you apart from your competition. By doing so, you can start to work with partners who compliment your skill set, ultimately improving the productivity of your operation.?

What Resources Do I Have?

Along with your skillset, resources that are readily available to you should be leveraged immediately. Resources could be anything from the car you drive to the job you currently have. However, one of the best resources that should be leveraged by all beginners is your connections.?

This is something that my partners and I did when?we first started our company?and continue to this day. By reaching out to our connections in the real estate industry, we received help that was crucial in closing our first deal. We continue to nurture these relationships by providing value to them in exchange, creating mutually beneficial relationships.

Ask Yourself, What Are My Real Estate Investment Goals?

Your goals are the biggest factor when deciding which route you’ll take in anything, especially long term real estate investing. Form a big picture view of what you want to accomplish in 10 years, 5 years, 1 year, etc.

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There is a saying that goes “you won’t know if you’re going in the right direction until you determine where you want to end up.” This is extremely relevant to your real estate career because there are truly so many paths you can take. Each investor has their own strategy, and all of them have been proven to work. If your goal is to retire early or leave your job, you should go with a strategy that will fit the timeline you want to pursue. In that case, your best option may be an aggressive investment strategy with high cash flow. If you’re looking for something more passive, a great strategy is to invest for tax benefits to offset your personal income.

The truth is, you can be successful when investing in real estate no matter which strategy you use. At the end of the day, it comes down to what you want to accomplish and the goals you have set for yourself. Once you have determined that, you can choose the best path to get there.

Best of Luck on Your Real Estate Investment Journey!

As a new investor, it’s easy to feel overwhelmed by the endless amount of strategies and information at your disposal. Sometimes, you simply don’t know where to start. Between the gurus that won’t stop spamming your feed and the abundance of online resources, things can get overwhelming quickly. That is why it is important to ask yourself these questions to make sure you are on the right path.

As I mentioned earlier, all five of these questions have intersections that play into each other. But, it is important that you consider all five when deciding on a real estate investment strategy. Focusing on one aspect won’t guarantee that you make the best decision. Instead, you must answer these questions yourself and weigh out the pro’s and con’s of each strategy you are considering.

You may determine that there are multiple strategies you’d like to pursue, and that’s fine! Many investors have multiple strategies they utilize when buying real estate. As long as you have a plan in place, you can’t go wrong.

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