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Choosing a real estate investing strategy can be a huge dilemma, especially when you are just starting out. Should you invest in short sales, note sales, or flips? Should you invest in cash flow or appreciation? Do you invest in your home town or nationally? Trying to decide where to start can be difficult and confusing. Every ‘guru’ promises to deliver never-ending riches with their strategy, but at the end of the day, it all comes down to what you are ready to take on, and how you want real estate investing to fit into your lifestyle.
Here are some points you may want to consider first:
Cash available
Some strategies, like buying foreclosures, require huge amounts of cash. Others, like wholesaling or buying at builder auctions, require little or no cash. In general, cash makes your investment life much easier.
Play to your Strengths
If you cannot handle stressful rehabbing situations or hate negotiating with contractors, then rehabbing may not be the right strategy for you. Always play to your strengths and hire others to help you with your weaknesses
Time available
Different strategies require different amounts of time or require that you be available for particular hours of the week. For example, rehab is extremely time-consuming. Anything involving the government, like buying at sheriff’s sales or appearing in court, generally requires that you be available during business hours on weekdays. If you have a full-time job or do not want to give up all of your after-work hours for real estate, you must not choose a time-consuming investment strategy. If you work at a regular salaried or hourly job during business hours, you probably cannot pursue a strategy that requires you to do real estate stuff during business hours.
What do you want your Life to look like?
Take a minute to think about this. It’s incredibly important to get this right, or you may regret ever investing when it takes over your life in a way you cannot control.
• What do you want your day to look like?
• How do you want to get your income – in large chunks, or monthly payments?
• Do you want employees, or do you want to go it alone?
Once you write down your ‘vision’ for the future, you are taking control of your life and business and you’ll have a better idea of what you should and should not do with your investments. It’s important to narrow down the options to really fit your life.
What are your objectives?
• Do you want something short-term or long-term?
• Do you want cash flow or equity growth?
• Do you want to be hands-on or hands-off?
• How much time and effort can you put into your investments?
These are all important considerations that should be thought out in advance of your first transaction. Once you get clear on what you’re looking to get out of your investment, you can start to seek out the right strategy.
What are your Options?
Make a list of Pros and Cons for each strategy and narrow it down to the ones that meet all your lifestyle criteria
Ask the Experts
For each of your top strategies, find someone who is an expert on that strategy and speak with them. Many veteran real estate investors are happy to share their knowledge with new investors, and hearing all about the pros and cons of their particular strategy will give you unique insight into whether or not it will be a good fit for you. Once you’ve done your homework, you will feel a lot more confident about your decision and less likely to make expensive newbie mistakes.
Do you have these skills?
• Am I a strong negotiator?
• Am I handy with a hammer and nail?
• Am I a good networker?
• Can I deal with forms, applications, and red tape?
• Do I have good organizational and follow-up skills?
• Am I a good manager?
Where are you financially?
• Do I have good credit?
• Can I qualify for conventional financing?
• Do I have any cash for repairs and/or holding costs?
• Do I need fast cash or a tax shelter?
• Can I get money from a private lender?
How much time do you have?
• Can I conduct business during normal business hours?
• Do I have more than 20 hours a week to devote to this business?
Here are some potential strategies:
• Wholesaling
• Fix and Flips
• Rehabs
• Short Sales
• Subject To/Lease Options
• Commercial
• Land Development/Construction
• Buy and Hold
• Tax Liens
• Bulk REO
• Note Buying
• Private Money Lending
• Syndication
Examples
If you have plenty of time, poor credit, no cash, and wanted to invest for fast cash you might choose wholesaling.
If you have no time during the day, good credit, and lots of cash you might choose private money lending or note buying since you can do that for the most part on the weekends.
Choose a strategy that matches your skills, and personality and you will have your best chance at success. For example, if you are a handyman, and enjoy working with your hands, perhaps buying and rehabbing homes to flip for a profit is a strategy for you. Research the markets you wish to operate in to see what opportunities present themselves.
The good thing about real estate is that, unlike traditional businesses, you are not confined to opportunities in a specific area. If there is a strategy you think may work, but you don’t have the skills, or expertise for that strategy, learn those skills, or partner with someone more experienced in that area.
Overall, be realistic, do your homework, and don’t put all your eggs in one basket. Real estate investing is a wonderful vehicle to build wealth and make fast cash, but you must know what you are doing and make intelligent decisions to succeed.
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Obstacles to Creating Wealth – Excerpt credit to Dianne Kennedy
Have you ever wondered what it was that really held you back from creating wealth? Here, you are not only are you going to learn the 3 biggest obstacles to your building your wealth, but you’ll also gain valuable insights on how to blow through them!
Let me just ask you, what do you think is stopping you from enjoying all the wealth and freedom that you’ve always wanted?
What have been the real roadblocks keeping you from achieving more, enjoying more, sharing more, and creating more?
More wealth… more time… more impact… more freedom…?
Many people mistakenly think that the amount of wealth you created was determined by things like your level of education–it’s not. There are many extremely successful clients who barely made it out of high school! Their lack of education didn’t stop them from achieving their financial dreams.
For example, take one of the people I’ve worked with several years ago – P. He struggled all through school and never went to college. Yet today he is at the top of wealthy individuals in the world! Not bad for a guy without any college education. My real point is that formal education is in no way predictive of financial success. And neither is picking the right industry or profession to go into–it’s not. I could share with you thousands of stories of people who made their fortunes in mundane, ordinary, and even “looked down upon” businesses.
For example, I’ve got one client who’s made a fortune selling scrapped computer parts! I’ve got another client who’s made her fortune selling all natural health care juices.
You see, none of these things are the real root of why some people are able to create massive wealth and other people work hard all their lives, only to end up financially mediocre.
After diving deeper and deeper into my analysis of the results of my clients these past 10 years, and testing my findings to verify them, I have found that there are three major obstacles that you must overcome to become wealthy. If you don’t successfully deal with these three obstacles, you’ll be forever locked into settling. Settling for less than you can earn, settling for less than you deserve, and settling for less than you were meant to have.
The Three Biggest Obstacles to Your Becoming Financially Free
Obstacle One: Isolation
The first obstacle that you face in building wealth is isolation. Without question one of the biggest things I consistently hear from business owners is how they were isolated in their wealth building. They had to do it all on their own.
They couldn’t share their success or failures with friends or family because this too often led to financial envy and jealousy. They’re failures because that didn’t help them get actionable and useful help to solve these challenges.
As you can imagine this really made it difficult for them to enjoy the level of success, connection, and financial freedom that they really knew in their heart of hearts they could attain.
How Isolation Held Me Back Financially
When I sold off my half of a series of multi-million dollar businesses that I had spent the previous eight years building the biggest thing I missed after I sold those companies was the relationships and mastermind teams I had spent so many years cultivating inside those companies. I walked away with a lot of cash, but for the first time in years, I was utterly on my own. I didn’t have a group of like-minded mastermind partners who could help keep me grounded and counsel me to make smarter, healthier, better financial decisions. And that lack of a peer group really hurt me financially. I made some dumb, painful, and totally avoidable financial decisions because I was flying solo, with no touchstone to ask me the tough questions and challenge my thinking.
That’s why over the past five years I’ve focused on masterminding with my peer group so that I had a simple way to tap into the energy, feedback, and contacts of a powerful group of proven achievers.
But most people don’t have access to a Rolodex with even 5 to 7 big players who are committed to stepping up and playing full out together. Yet it’s essential that you build a mastermind alliance with at least this many people, if not more. If you aren’t able to do this, you’ll always struggle and won’t ever be able to reach the highest level of wealth and happiness that you are capable of.
Over the years I’ve made this point in dozens of different ways. And I’ve seen how it’s been the single greatest determiner between massive success and total failure.
Alone you are vulnerable and will never achieve your fullest potential. But when you connect with the right mastermind group, the chemistry will literally propel you to heights you never dreamed possible.
Obstacle Two: Fear
The second obstacle to people building all the wealth they can is fear. This fear can take on many forms, but at its most basic level savvy business owners have learned that in order for them to live the life of their dreams they have to learn to take action in the presence of their fears.
How Is Fear Stealing Your Future?
Most people let their fears rob them of their future. When they give in to their fears they give up on their dreams, and they settle for so much less than they are capable and deserving of enjoying.
The saddest part is that their fears don’t just cost them, they also hurt the people they love most. It impacts their relationships with loved ones. It diminishes them as a role model for their children. It saps their family of so many opportunities. So what’s the fear that’s stopping you?
Maybe you’re like Client A whose biggest fear was that he didn’t know enough how to build his portfolio of assets by moving up to larger commercial deals and raise the private capital he needed to fund those deals. He was afraid that no one would find him credible enough to lend him the money, or partner with him on deals.
He bought over $20 million dollars of real estate with other people’s money. In fact, on just one deal he did raise over $5 million to fund the deal and pick up over 100,000sf of commercial space! He’s learned to just step up and accept the challenge of raising money for his deals even though it still scares him a bit.
When you have a peer group of big thinkers and high achievers pushing and stretching you anything, and I do mean anything, becomes possible.
Obstacle Three: Hesitation
The final obstacle holding you back from all the wealth and financial freedom you desire is hesitation.
You’ve gotten so much conflicting financial advice over the years that you quite simply don’t know which direction to move in. If you could only have a clear and straightforward plan to follow to get you to your financial goals you’d put in the time, talent, and creativity. It’s just that you are afraid of putting in all the work and finding out later you followed the wrong plan.
Take the example of Client B who had built a highly successful telecommunications company. But because she didn’t know a few key principles on how to build a saleable business, when she wanted to get out of the business to start her family, she just let the successful business go. It wasn’t marketable as a business. She has since learned exactly how to build a business that not only generates huge cash flow for the owner but also is saleable as a business. The blind spot of not knowing that ten years ago literally cost her millions of dollars.
This brings up a very important question…
What Are Your “Blind Spots” Costing You?
Every day I meet people whose financial ignorance and blind spots cost them tens of thousands to millions of dollars. Perfectly avoidable losses if only they had clearer information and knowledge about how to invest their wealth.
As the world’s greatest investor Warren Buffet says, “Risk is not knowing what you’re doing.”
What you don’t know can and will hurt you. Sticking your head in the sand doesn’t protect you; it just leaves you vulnerable to painful, costly mistakes.
Don’t let that happen to you. If you’re committed to step up and play with the big players you have got to learn what they know because what you don’t know CAN and WILL hurt you!
Here are some recent questions from my blog
QUESTION: I am in the process of acquiring a property with a partner. We are paying cash but will turn around and get a HELOC pretty quick on it. The mortgage will be in his name, therefore the property will need to be in his name as well. We can’t create an LLC and put the property in it because he will be getting the HELOC in his name only. Any ideas about how we can structure it so we both ownership interest in it? Thanks for any feedback!
ANSWER: After closing, you can add yourself to the Deed
QUESTION: I have a rental property in Colorado and have created a Colorado LLC to hold it. However, I bought the property under my own name and have a small mortgage under my name. The mortgage company won’t let me transfer the title to the home to the LLC with the mortgage in my name. I could pay off the mortgage, but that would leave me more cash-poor than I care to be. A friend suggested that I lease the property to my LLC (it’s a single member) and that would give me the legal umbrella of the LLC and still keep the mortgage company happy. Anybody ever done this or heard of it being done?
ANSWER: Usually, the mortgage company will not let you transfer the title without triggering the due on sale clause. I have usually just transferred without getting them involved and as long as the mortgage is being paid, then you are fine. Going on almost 10 years of my properties being in an LLC still with a mortgage in my name.
Not sure how leasing gives you protection when it still shows your name.
I address many of these issues in my Wealth Building Plan. Make sure you are getting the best tax advice. Let me evaluate your financial and tax situation, then develop a customized tax strategy just for you. Together, we will come up with a strategic plan designed to answer your questions as you build your own customized wealth-building plan. You can get more information at WealthBuildingPlan
