Your Personalized Path to Real Estate Investing: Choosing Investments For Your Investor-Type
"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." – Warren Buffett
Personalized Path to Real Estate Investing: Choosing Investments For Your Investor-Type
There are tons of ways to start investing in real estate—everything from crowdfunding sites to residential fix-and-flips, to commercial storage units and office buildings. All these options are at your fingertips if you know where to look.
This abundance of choices can be overwhelming, especially if you're new to the wide world of real estate investing. However, with a little guidance, you can narrow down the options and identify which types of investments align best with your lifestyle, financial goals, and personality.
After working through those six soul-searching steps, you likely fall into one of these groups:
The Lots of Money / Little Time / Hands-off Investor
The Little Money / Little Time / Hands-off Investor
The Little Money / Plenty of Time / Hands-on Investor
The Lots of Money / Plenty of Time / Hands-on Investor
Ready to discover which investments fit your investor type? Let’s dive in!
The Lots of Money / Little Time / Hands-off Investor
If you fit into this category, it’s likely you’ve been saving for a while or investing in the stock market since your first paycheck. The tax benefits, passive income, and potential positive impact of real estate investments may now be catching your eye.
However, you’re a busy individual—juggling family, a thriving career, or both! You don’t have time to research neighborhoods, tour properties, or manage renovations.
Recommendation: Become a Passive Investor
For investors with cash but no time, passive real estate investments are ideal. You can invest passively through turnkey rental properties or commercial real estate syndications.
Turnkey Rental Properties
These are smaller-scale investments as simple as they sound. You purchase a ready-to-go rental property requiring minimal effort on your part.Commercial Real Estate Syndications
In a syndication, investors pool their money to purchase large commercial properties. Syndicators handle the research, market analysis, broker meetings, hiring contractors, and property management.Your role? Invest your capital and rely on the syndicators' expertise. You’ll receive regular distributions (your share of the returns) and, when the property is sold after the holding period, a portion of the profits.
Overview
What you put in: Your money
What you leverage: Other people’s time and expertise
What you get: Passive income and confidence that your investment is in good hands.
The Little Money / Little Time / Hands-off Investor
If you don’t have much money or time to invest in real estate yet but are attracted to the wealth-building potential, there are still options for you.
Recommendation: Invest Through Crowdfunding Sites
Real estate crowdfunding platforms allow you to pool small amounts of capital with other investors to fund commercial real estate projects. Unlike Kickstarter, where rewards might include sneak peeks or merchandise, crowdfunded real estate offers cash dividends.
These platforms typically have low minimum investment requirements and are open to both accredited and non-accredited investors.
Overview
What you put in: Small amounts of money
What you leverage: Crowdfunding platforms and experienced deal sponsors
What you get: Diverse investment options, flexibility, and opportunities to grow wealth with minimal capital.
The Little Money / Lots of Time / Hands-on Investor
If cash isn’t flowing freely right now, but you’re willing to put in the work, real estate investing is still within reach. Your greatest asset is your sweat equity—the time and effort you’re willing to invest in finding deals, completing paperwork, and even renovating properties.
Recommended Strategies
Fix-and-Flips
Purchase a distressed property, fix it up, and sell it for a profit. If you lack upfront capital, short-term private loans can help. Once the property sells, you repay the loan and pocket the profits.The BRRRR Strategy
BRRRR stands for Buy, Renovate, Rent, Refinance, and Repeat. Unlike a fix-and-flip, you hold onto the property long-term, using its increased value post-renovation to refinance and pay off any loans.Wholesaling
If you’re skilled at networking and finding off-market deals, you can get properties under contract at a low price and assign them to buyers for a profit.House Hacking
Buy a multi-unit property, live in one unit, and rent out the others. Rental income from tenants covers your mortgage.Overview
What you put in: Your time and effort
What you leverage: Other people’s money
What you get: Hands-on experience and potential for high returns with little upfront capital.
The Lots of Money / Lots of Time / Hands-on Investor
If you have both time and money to invest, you’re in an excellent position to maximize your returns.
Recommendation: Lead Syndications or Invest Passively
Lead Commercial Real Estate Syndications
Take charge by sourcing deals, building a team, raising capital, and managing operations. You can either go solo or partner with others to scale faster.Savvy Passive Investing
Even as a passive investor, you can play an active role in vetting deals and sponsors. With knowledge of deal structures and underwriting, you can confidently assess opportunities and make informed investment decisions.Overview
What you put in: Your money and time
What you leverage: Others’ expertise, time, and resources
What you get: Freedom to carve your own path and maximize your wealth-building potential.
Summary
This article covered a variety of investment strategies tailored to different investor types. To get the most out of these options, take the time to assess your financial goals, life stage, risk tolerance, and available resources.
No matter where you are on your real estate journey, there’s a path that suits you. Now, it’s time to take the first step!
