Are you struggling with developing a real estate investment strategy for your real estate investment business?
Here are some of the strategies that you could go for:
- Buy and Hold – you find the right property and rent it out to a single tenant (family etc)
- Multi-Family – you find a property and convert it into multiple lets
- Flips – find a property, renovate it and then sell for a profit
- Wholesaling – The middle man between the seller and the investor
- Short Term Rentals – think about the Airbnb model here
- Real estate development – building new houses
- Commercial property conversion – converting old offices to apartments
These are just a few of the more popular real estate investment strategies. There are others. Why am I telling you this? Because I recommend you choose one to begin with and stick to it!
How do you Create a Real Estate Investment Strategy?
Don’t be a Dabbler
A lot of real estate investment newbie’s start dabbling in a number of different strategies. You know a little bit of this and a little bit of that. They will get involved in multi-family’s and then want to start flipping for example.
To be honest with you I did this when I first started out in real estate investment. It took me quite a while to realise that it was all getting me nowhere. In the beginning I did a lot of flips, and although they all made money, this strategy was not getting me to where I ultimately wanted to be, and that was to own a portfolio of profitable assets. I don’t want you to fall into the same trap. You may think that you have what it takes to follow different strategies in the beginning and be successful with all of them but the truth is that you won’t.
Why is this?
Well different real estate investment strategies require you to develop different relationships to succeed. When you have these essential relationships in place, together with the right systems and people, only then should you consider another strategy.
What is the Best Real Estate Investment Strategy for Beginners?
Pick one and focus on it until you get really good at it and then you can look at other options. That is the best strategy to follow.
Let’s say that you like the idea of following the flip or wholesale strategy. In order to be successful with this you need build relationships with the right people (such as real estate agents), develop your expertise in the market and build rapport with customers etc.
In practice it can take you 2-3 years to achieve the right level of expertise to be successful with your chosen strategy. Don’t be fooled by the “gurus” who tell you that it is just a matter of finding the right property at the right price. The theory is easy to grasp but making it happen is far from easy.
Here is a reality check for you. Real Estate Agents already have a number of investors in their “inner circle” that they will offer the right property at the right price to before they come on to the market.
They have deals going on with other developers all of the time and you have to become a member of an real estate agent’s inner circle. The more inner circle’s you are in the better. But this takes time unfortunately.
Here is a second reality check for you. There are no really good deals sitting on an agent’s desk waiting for a real estate investment newbie to come and snap up. It just doesn’t work like that. If you are not in that agent’s inner circle then you will never know about the deals that they have.
So what is the moral of this story, what is the best real estate strategy? Any of them, all of them are profitable. If you focus on one real estate investment strategy and get yourself into those precious inner circles then you will have a much greater chance of success than trying to have your fingers in several different pies.
Focusing on One Real Estate Investment Strategy Works
In my real estate investment business right now, I only focus on two strategies, multi-family and land sourcing. The land sourcing is a fairly recent addition to my business, only 3 years or so. I can do both of these things really well, because I have put the time in, built the relationships, created the systems and have a great team around me.
Before I got involved with land sourcing I decided to focus solely on the multi-family strategy. I knew that to be successful I would have to develop the necessary experience, get myself into the right inner circles and put the systems in place to operate and source the right properties.
In the areas I operate in, we may only get two or three good multi-family opportunities a year. So, I have to make the best of the opportunities that come my way. Some other regions will have more opportunities but that is just how it is. I want my properties fairly close to where I live and so I have to stay focused and not be tempted by other potential “goldmine areas”.
So that is what I do and it works out really well. Without all of this being in place first I would never have taken on the second strategy of land sourcing. I learned the hard way at the beginning that dabbling in different real estate investment strategies just gets you nowhere.
Once you have decided on the best real estate investment strategy for you then stick with it and focus on it. When people know that you are in the real estate investment business you may find that they offer you all kinds of other opportunities that are outside of your chosen strategy. My advice is to politely turn these down.
Let’s say you go for the flip strategy and then someone offers you the chance of a supposedly lucrative commercial property conversion. You have no experience of commercial property conversions so how are you going to know if the deal is sound or not?
You may get lucky. But the chances are you won’t. Unfortunately there are people out there on the lookout for gullible real estate investors that they can hand off a “dead” deal to. When you stick with one real estate investment strategy and get really good at it you will be able to smell these dead deals a mile away.
My Final Thoughts on Developing A Real Estate Investment Strategy
If you know anything about the science of neuro linguistic programming (NLP) you may be aware that one of the core strategies is around the power of focus. You may have heard that “when you focus on something it will grow” and other similar statements.
I am a firm believer in this and I found out the hard way that dabbling doesn’t work. I lost money and valuable time dabbling and I don’t want you to do the same. So, commit to focusing on one real estate investment strategy and become the best that you can be in it before you even think about getting involved in another.