Understanding your personality, assessing your abilities in combination with the market is the best way to be successful in your real estate investing career.
Evaluate yourself in these key areas:
- Real Estate Investing Is Like Television
- Risk Tolerance
- Investment Maturity Timeline
- How Much Time Can You Invest – can you flip full time, do you want more turnkey?
- What’s Your End Game. Personality – vision, excitement, what are you desires
- How Much Capital Do You Have?
How To Determine Your Real Estate Investment Strategy
What kind of shows do you like watching? Do you like Price Is Right? Consistent, reliable on at 11EST? Or are you an on-demand, streaming Netflix fan? Do you like to decide when your going to work on it no matter what time of day?
In regards to any investment, how much risk can you tolerate will always play a large role in your strategy.
Wholesalers carry zero financial risk due to the fact they hold no assests or liabilities during a transaction. Wholesaling makes for an appealing strategy for beginners as they become familiar with real estate investing.
Buy & Hold Investors hold risk in a unique way due to the life expectancy of property and capital expenditures such as roofs, furnaces and large household expenses will be on their tab. Although theoretically this should be covered by a steady stream of rental income, vacancies, bad tenants or major capital expense such as foundational work can be some of the main risk buy and hold investors face. This is largely why sound analysis and due diligence is critical during the buying process.
Flippers and Rehabbers carry varying levels of risk depending on the calculated ARV (after repair value) of the home, once the construction or remodeling is complete. These investment are typically down in the short term, which could and often carries the high interest of hard money and short term gain tax. If a Rehabber is only painting walls, laying new tile and replacing carpet he may carry very little risk. At the same time some rehabbers could be buying lots with homes, completely demolishing the lot, effectively wiping any value and trusting their new construction will cover all costs and return a profit.
Each form of investing requires due diligence and understanding. However knowing yourself and your tolerance for risk before you choose can help you make the right choice.
When you need the investment to mature is key to understanding the right real estate strategy. In laymen terms, when do you want to stop investing and start reaping the rewards! If you’re unsure a simple time value of money calculator can help you to determine this. However, it’s safe assume that most people and their 20’s and 30’s have more time and can take on risk with their investing. Why older more mature investors might be satisfied with less risky Investments
– can you flip full time, do you want more turnkey?
Personality – vision, excitement, what are you desire