When you tell people you are a real estate investor, (or you want to become a real estate investor), their next question usually is, “Are you a Flipper? Are you a Buy and Hold guy? How many doors do you own?” and the list goes on.
Yes, there are many different Strategies within real estate that you can invest in. Some of these different Strategies are:
-Investing in Single Family houses for the long term
-Flipping Single Family houses in the short term
-Buying smaller income producing buildings (2-4 units)
-Buying larger income producing buildings (5-50 units)
-Buying Apartment Buildings (over 50 units)
-Buy, Fix, Refinance and hold (essentially you are fixing and flipping the property to yourself)
-Short term market rentals (Furnished rentals of some sort – Airbnb, VRBO, etc.)
-Rent to Own’s including Sandwich Lease Options
-Wholesaling (signing deals and selling the contract to an investor)
-Commercial Real Estate (plazas, store fronts, parking lots)
-Residential or Commercial Land Development
-High Rise Development
-Assisted Living / Retirement Homes
-Lending / Notes / Holding VTB’s on properties
I definitely recommend not trying to be all things to all people. There really is no such “unicorn” or a “jack of all trades” when it comes to real estate investing. Perhaps a full time investor who has completed hundreds of transactions in their career may have touched upon a lot of these Strategies in their life time, but guaranteed they have a few that they keep coming back to, they understand that market segment the best, enjoy their time playing in that arena and have done very well profit wise with those few strategies. AKA they are on their way or have already become an expert in that Strategy.
The benefit of becoming an expert in a single segment of the market is that eventually with great branding and marketing, leads will come your way without as much work as it used to take. People will simply begin to know you or your company as the one that can get things done in that market. As the authority figure in that industry, other leads and opportunities will come your way that you could sell off or ask for a commission on. For example a person who is a buy and hold authority on small apartments will have a large enough network where they could easily profit from a wholesale deal that was presented to them because the owner of that lead saw them as the dominant go to person for all things real estate and that lead is worth $ to both of you when executed on.
But I also believe that there is one more layer. One extra level of the matrix that will make you even more successful. Yes, that is being a niche player within that Strategy or market.
You see, saying that you rent Single Family Homes is still a VERY broad market. Within that, there are at least three price points you could be playing in – entry level homes, middle of the market homes and higher end homes. And then within those price points, there are different approaches and strategies you could take within each price point. I think you get my drift here.
As one of my mentors Keith Cunningham says “Don’t go for width, go for depth!” In other words really try to pick a segment of the main Strategies up top, and pick another sub-segment or Niche that has opportunities in your market and go really deep in it. Become the dominant player in that Strategy’s niche. Become the expert in that field. If you spend an hour a day educating yourself on this area of your market, and implement your learning on a weekly basis, you will have the equivalent of a PhD in that area in 5 years or less. People can’t copy what they can’t catch. It will get to a point where you will be so proficient in your Strategy’s niche that you could become the trend setter in your city, county or entire region. You could essentially begin to dictate the terms of the entire market in your area because you own the highest percentage of market share in the area and you are dominating by delivering exceptional results. How awesome would that be?
To give you an example, I have spent 80-90% of my time as a buy and hold person in smaller building blocks. We have been ramping up our buying over the past 5 years, and have been investing for almost 15 years at this point. We bought them at a discount, bought some of them creatively financed, they are all located close together and they are easy to manage. So within this Strategy our niche is that, we do higher end rentals with 20% of them being furnished corporate extended stay rentals. We have a competitive advantage in one of the cities that I invest in being that there aren’t nice extended stay hotels that executives would want to stay in for more than 2 weeks without having their own kitchen or a bit more space to live in. We jumped into the market, bought out some units from someone who was retiring from the industry and have done well by knowing our niche market.
We became dominant in our market with our superior product offerings, or systems and our ability to market to our target clients. (PhD students, executives, relocations, future home buyers, insurance claims, etc.) Remember there is always a different level you can dig down to in your overall Strategy. Just make sure there is a market for what you want to do, it is sustainable and you are getting in at a discount.
So as you are getting ready to pick your niche, my advice is to take a look at your strengths and weaknesses when thinking of which specific area to focus on. You might even want to do some personality profiling to really know who you are at your core and where your attention naturally goes throughout the day (Kolbe.com, DISC, Myers-Briggs, etc.). Some people have the personality and stomach to play in the smaller rental building market. Some people are more suited to being their own GC on their development projects in the beginning and some people need to hire 100% of it out. Some people like to work in that entry level price point and are really great at everything about that price point.
“Whatever you do, be a good one!” as my grandmother used to say.
Real Estate Investing is a vast playground that you can play and get involved in. In order to make sure you don’t get “hurt” while playing, not only will you need to be clear about your overall Strategy and niche, but make sure you are educating yourself daily and work with mentors or coaches who know what they are doing so you can build up an A-team of players around you to get you to where you really want to be, which is controlling your time and living life on your terms!
See my blog post about only working with A-players for more information on only working with top class acts!
To your success!