The Beginner’s Guide to Investing In Real Estate: Choosing Investments For Your Investor-Type10/9/2020
There are TONS of ways in which to get started investing in real estate. Everything from crowdfunding sites to residential real estate fix and flips to commercial storage units and office buildings are at your fingertips if you know where to look. This is also why, as a beginner in the whole wide world of real estate investing, you might feel overwhelmed. However, with a little guidance, you’ll be able to narrow down which types of investments suit your lifestyle, financial goals, and personality best. In our last article, we walked together through gaining a macro-view of your current life situation, determining your why, deciding how hands-on you desire to be, assessing your risk tolerance, and even learning how much money you’re ready to invest. Ultimately, it’s likely that, after slogging through those six soul-searching steps, you fall into one of these groups:
Ready to learn which investments fit each type of investor? Let’s go! The Lots of Money / Little Time / Hands-off Investor If you’re someone who fits nicely into this category, it’s likely you’ve been saving a while or investing in the stock market since the day you received your first paycheck. It’s also possible that the tax breaks, passive income, and potential positive impact your real estate investments can make on a community are attracting your attention. However, you’re a very busy individual - maybe with a family or in the prime of your career or both! You haven’t the time to research neighborhoods and markets or tour properties, much less to actively renovate or manage a property. Recommendation: Become a Passive Investor For investors with cash but no time on their hands, passive real estate investments are the ticket. You can invest passively through commercial real estate syndications. As you may remember from previous articles, a syndication is a group investment where money is pooled together to buy a large piece of commercial real estate property. Syndicators do all the research for you, from analyzing markets to meeting brokers, hiring contractors, and much more. They find commercial real estate they think would be a homerun investment and then orchestrate the deal, the renovations, operations of the property, and a few years down the road, the sale. This is where investors like you come in. You rely on the syndicators’ time, expertise, and team. Meanwhile, your money is invested, and every quarter you receive a distribution check, your portion of the returns earned on the asset. Plus, when the property sells after the hold period, you receive a part of the sale’s profits. Overview of These Types of Real Estate Investments:
The Little Money / Little Time / Hands-off Investor In contrast, if you don’t have much money or time to spend investing in real estate (yet!), but are attracted to real estate as a way to build such wealth, there are options for you too! One of the best ways to get started investing in real estate with little capital is crowdfunding sites. Recommendation: Invest through a real estate crowdfunding site Just as Kickstarter funds new products, there are real estate crowdfunding sites where people can pitch in low amounts of capital toward commercial real estate projects. The difference? Crowdfunded commercial real estate pays cash dividends instead of t-shirts and sneak peeks of the product’s prototype. Real estate crowdfunding sites are open to public use, typically have low initial investment requirements, and are available to both accredited and non-accredited investors. Overview of These Types of Real Estate Investments:
The Little Money / Lots of Time / Hands-on Investor So, you’re interested in real estate, but cash isn’t exactly “flowing” in your life right now. That’s okay, because if you’re willing to roll up your sleeves, there are still ways you can make your first investment in real estate. You still have something of value to bring to the table, sweat equity. This means you’re willing to spend the time and effort to find properties, devour the paperwork, rehab the property (maybe personally), and make your passion for real estate become create cash. Your Strengths, Interests, and Goals If the above describes you, take a moment to identify your strengths and passions. Does the thrill of the hunt for deals interest you the most? Is the renovation planning and execution process exciting to you? Maybe you’re a numbers nerd and can’t wait to analyze the trends and markets of each neighborhood? Additionally, what are you in it for? Long term equity or short-term capital? Here are some of the most common ways you can invest in real estate with little money and lots of time. Recommended Real Estate Investment Strategies
Overview of These Types of Real Estate Investments:
The Lots of Money / Lots of Time / Hands-on Investor CONGRATULATIONS. You’re in a fantastic position to make your money grow exponentially. Recommendation: Lead commercial real estate syndications If you’d like to be an active investor, leading your own syndications puts you in the driver’s seat. You get to find the deals, assemble the team, raise the capital, and have a say in the day-to-day operations. The choice is yours to go it alone as the syndication lead or to partner with others and create a syndication business. Recommendation: Become a passive investor in commercial real estate syndications You also have the option to be a passive investor who’s extremely active in finding and vetting deals for real estate syndicators or private equity firms. Savvy passive investors know the lingo and have some basics down about deal structures and underwriting. Any investment can look great in a fancy marketing packet, but only savvy investors will know the right questions to ask and be able to reveal details about the deal and the team. Overview of These Types of Real Estate Investments:
Summary This article just threw a ton of information at you, and even though it was separated into categories, an overview might do you some good. Before reading this, we hope you took some time to identify your investing goals, your current life stage, your risk tolerance, and your investing goals, as outlined in The Beginner's Guide to Investing In Real Estate: Where to Start. From there, it’s likely you fell into one of four categories. Within each group, beginner investors have multiple opportunities to get started on their real estate investment journey. Our suggestions for real estate investment opportunities per investor-type are as follows:
ConclusionAll in all, there are real estate investment opportunities for every type of investor, at every stage of life, with any range of available capital and time freedom. Once you’re able to identify which investor type you are at this time in your life, you can see the opportunities within that category and how they make sense for you.
One common misconception is that you need a decent amount of capital saved up in order to get started investing in real estate. The options presented above, coupled with The Little Money investor type, debunked that myth! Now, I encourage you, don’t wait a minute longer. Get started toward becoming a real estate investor by taking action on one of the passive or active investment opportunities described above, according to the category in which you best fit. We look forward to chatting with you in the near future about our syndication opportunities. Comments are closed.
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Justin GrimesAlly in generational wealth creation & protection. Archives
October 2020
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