Real Estate Investing – Developing a Strategy

Someone recently asked me about investing in real estate. He wanted to invest, but didn’t have a strategy developed. He said he was considering asking a property manager (not even a Realtor) what strategy he should use.

And there are dozens of different strategies: Wholesaling, rehabbing, lease-options, subject-tos, buy and hold, and so on. All of them can work. All of them do work. True, sometimes–in certain economic climates and certain geographic locations–one will work better than another. But they can all work.

Different techniques demand different skills and different skill sets. Beyond that, though, one important variable that is too seldom addressed is that some people–personality-wise–are better suited to one technique than another. Some people love doing rehabs. But they’re riskier, and you may spend more sleepless nights worrying. Some people stick to wholesaling–a low-risk but (comparatively) low return strategy. Some people have made a lot of money working with owners facing foreclosure. Others just don’t like doing that.

And that’s OK.

But to invest, you need a strategy and you need a comfort level with that strategy. Those are things only you can do. Now, you don’t have to know everything about everything. That’s why there are Realtors, lawyers, accountants, and others. But you do need to know enough to understand the process. And you need to know enough to ask the right questions.

For that reason, never turn over the strategy development to someone else. Never. You can seek suggestions and recommendations. And once you’ve decided on a course of action, you can use your team of experts to do what they do best. But don’t turn over those first steps–developing a strategy and determining your comfort level–over to someone else.

It reminds me of the joke:

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A pig and a chicken were walking by a church where a gala charity event was taking place. Getting caught up in the spirit, the pig suggested to the chicken that they each make a contribution.

“Great idea!” the chicken cried.

“Let’s offer them ham and eggs?”

“Not so fast,” said the pig testily. “For you, that’s a contribution. For me, it’s a total commitment.”

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In your case, those other advisors are the chicken. You’re the pig. For them, it’s just another business deal. For you, it’s a major commitment.