Real estate investing is one term that encompasses an almost unlimited number of investment strategies. How do you choose which type of investing is best for you?
If you put 10 real estate investors into a room, youll probably end up with 20 (or more!) different ways that they invest. There is no right way to invest. Residential real estate is the most common type of investment because there are many properties and a constant need (in some markets) for affordable rental housing. But even within that narrowed scope, there are many ways to invest from flipping to renting single family homes to developing multi-family complexes and so much more.
If youre trying to decide which type if investing is best for you, use this list to help you narrow down your choices.
Theres the way the property will be used
For example, you can invest in residential properties, commercial properties, empty land, or vacation properties, just to name a few.
Theres the way the deal will be structured
For example, you can buy the property outright with your own money, you can get a mortgage, or you can partner with other investors and use their money, just to name a few.
Theres the way that youll add value
For example, you might build a structure on empty land, or you might buy a property that you rent, or you might remodel a building for a different purpose, just to name a few.
Theres the way you hope to profit
For example, you can buy and hold (perhaps doing nothing with the property or using it yourself), you can rent it out, you can sell it, or you can do lease-to-own deals, just to name a few.
So how do you put together the best type of investing for you? Consider the following:
- Your financial goals (what types of investments can help you achieve them?)
- Your interest (what do you want to do?)
- Your experience (what kind of transactions are you comfortable with?)
- Your education (what do you already know and what do you need to know?)
- Your skill (i.e. in remodeling, structuring deals, selling, managing property, etc.)
- The market you plan to invest in (it doesnt have to be the market you live in)
- Your access to capital (not necessarily the money you have but the money you have access to)
- Your network (its often WHO you know!)
Pick a real estate investing model that you think youd enjoy and try it. Get educated, gain in-the-trenches experience, do deals. Avoid the temptation to try many different deals at once just focus on building your knowledge and experience in one type to start, although you can always branch out later.