It has often been said that there are several different ways to invest. One of the things that makes the business so great is that you can do it at your pace, with almost any background and any skill set. An investor you meet at a local networking meeting may have a completely different approach to the business as you, and that’s ok. Regardless of how you invest, you should have a defined plan and strategy. This can, and probably will, change over time but you need to have a vision. There are a handful of ways to profit from the wonderful world of real estate. Don’t let your philosophy deter you from investing the way you want. Here are five different types of investing strategies. Which one do you fit into?
- Full-Time Flipper: The most common current form of investing is the fix and flip investor. All you need to do is turn on the TV any night and you will find a handful of flipping and rehab programs. What makes flipping so appealing is that you don’t need a business license, formal education or certificate to get started. This doesn’t mean that you don’t need to know what you are getting into, but you also don’t need a four-year college degree. Full time flippers are on the constant hunt for bargain deals and discounted properties. They have a steady flow of projects they are working on and new deals in the pipeline. Flipping full time is a great career, but it is also full of stress and a lot of work. Just because you don’t have traditional 9 to 5 hours doesn’t mean you aren’t working. A successful full-time flipper can often work early mornings, nights and weekends finding new deals and organizing work flow.
- Part Time Flipper: As the name indicates a part time flipper only focuses on real estate on a part time basis. They maintain their full-time employment and practice real estate on the side. As unorthodox as this sounds it is actually quite popular. With the increase in technology you don’t need to stare at a laptop or be attached to your phone eight hours a day to find deals. You can still be active in real estate at nights or on the weekends while holding down a full-time job. Sure, you may lose some deals, but you also get to keep your steady paycheck, insurance and benefits. This is fine with you because you only want to close a deal, or two, a year. You build a team around you to take care of the day to day operations with the rehab. You don’t mind making a little less, because you are also doing less work. Part time flipping yields part time income, but you also have your regular paycheck to fall back on. This is a method of investing that has gotten much more popular in recent years and is a trend that doesn’t appear to be slowing down any time soon.
- Buy And Hold: There is much more to real estate investing than flipping houses. In fact, it wasn’t too long ago that the most common form of investing was buy and hold rentals. Landlords looked for multifamily properties and rented them out for years. With the explosion in the rental market this has become in vogue once again. However, there are a handful of drawbacks with this approach. For starters, you need to have anywhere from 15-25% down payment if you plan on getting a mortgage. You also need to factor in all the expenses and find properties that produce positive cash flow. Additionally, you need to have the patience or a team in place to manage the property. If you check all those boxes, you can reap the long- and short-term benefits. Not only will you realize monthly cash flow, but in time you will gain property appreciation. All the while you can take advantage of tax benefits making the property even more appealing. Buy and hold is a great strategy if you are willing to hold the property for a prolonged period.
- Partner: You don’t need to invest by yourself to be successful. There are many investors who seek out a partner to offset their deficiencies. If you have capital, but not time or expertise a partner can be the perfect remedy. If you know the business, but don’t can’t find money a partner is a great solution. There are numerous examples of a partner helping start or grow a portfolio. Not every partnership works, but in the right circumstance it can be just what the doctor ordered.
- Wholesale: If you enjoy marketing and finding properties but don’t have the time or patience to wait for the payoff wholesaling is for you. Wholesaling is essentially finding a discounted property, getting it to contract and passing the deal off to an end investor. As soon as the contract is transferred you will make a predetermined amount and move on to the next deal. You don’t have to wait for the property to be finished and sold to make money. You won’t make a lions share of the profits, but your downside is eliminated, and you can close more deals over the course of a year.
Before you get too far in real estate you need to determine what type of investor you are or what kind you want to be. You can always change as you move forward, but you should have an idea in place when you get started.