This sounds like an oxymoron, doesn’t it? Typically we think of being stuck due to being at a dead end with a lack of options. But, in fact too many options can and does often cause confusion and a sort of intellectual paralysis for new real estate investors.
Earlier today I had a conversation with a relative newbie investor. He said to me the following:
“… I have recently had information overload. I hear so many different strategies and suggestions and I have been pushed in many different directions. I know that I would like to make real estate a larger part of my life and I’m just trying to figure out exactly which direction to go with.”
Are you new to the sport of real estate investors? Does this sound about right? Let’s see if we can put some of this into perspective…
Allow me to put on my “mentor” hat on for a minute.
When we talk about “analysis paralysis” as it relates to the world of real estate investing, we have to note not only the abundance of techniques and “genres” under the subheading of real estate investing, but also how drastically different these techniques are. I mean we have something as “vanilla” as putting 25% down on a long-term income-producing asset, to lease-options, sub2, owner-financing retail, fix and flipping, wholesaling, and everything in between.<.p>
I can imagine that looking into this world can make someone’s head spin. Although, I must say, it really should not. Let me explain:
What do you want?
Every method and technique in REI exists as a means to achieving a specific result. The first step in the process, therefore, should be to identify your goals and limitations, which in turn would dictate which methods are appropriate taking away all of the confusion.
Think of it this way. If you wanted to travel from New York to Ohio, you would have several options at your disposal including flying, driving, or going by bus. Flying will likely be the fastest but also likely the most costly, especially on short notice. Furthermore, if you wanted to have the luxury of relative quite while in rout, you could spend more money to fly 1st class.
Do you have enough money to fly first class, or to fly at all? If not, going by car would take much longer, but it may be more economical while allowing you the comfort of traveling “on your terms”, to an extent. You do, however, have to own a reliable vehicle which gets reasonably good gas mileage, and be willing to and able to spend several days on the road.
And what if you have several days, but do not own a reliable car? Well, the bus may be the way to go in this case. It will be highly uncomfortable, but if that’s all you can afford, then this is the only option, and it will get you to your destination.
REI is the same way.
So you see, making a decision around travel is a balancing act, much as life itself, which requires knowing your objectives and limitations. Real estate investing is similar to that in that every strategy in REI is a means to a specific end taking into account your intellectual, emotional, and financial limitations.
For instance, when we talk about Lease/Option sandwich deals to create cash flow now and capital gains later, we must talk about SFR and very high level of your involvement. However, this strategy may be accomplished with minimum investment capital.
When we talk about seller financing at the exit, we talk about SFR and necessity to leave sizable cash in deals for prolonged period of time.
If we talk about sizable and stable cash flow, then we probably need to look at multi-family in lieu of SFR.
And so on…
Conclusion
Everyone has their own niche in REI, but everything we do is rooted in what we want and need. You must define your wants and needs in very specific terms to be able to pair yourself up with an investment strategy. But when you do this, you’ll stop being confused. It’s really quite simple. Hope this helps you newbies out there!
4 Comments