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How to Choose Your Real Estate Investment Strategy

This week’s question comes from Natalie on the Real Estate Rookie Facebook Group. Natalie is asking: How did you narrow your focus to determine your strategy? And how do you get good at analyzing real estate deals

This is one of the most-asked questions we receive. When you’re starting as a rookie real estate investor, every strategy seems like a good one. You may hear a guest on the Real Estate Rookie show talk about wholesaling or flipping or short-term rentals. Before long, you’re already planning your next exciting purchase even if you had another one already in the works. This “shiny object syndrome” is common when getting started, and while it’s good to know about many different investing strategies, changing yours too often can lead you well off the path to financial freedom.

Here are some suggestions if you’re torn between strategies and need to up your analysis game:

If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

Ashley:
This is Real Estate Rookie episode 192. My name is Ashley Kehr and I am here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration information and education you need to kickstart your real estate investing career. And I’m here with my lovely co-host, Ashley Kehr. What’s going on Ash? What’s new on the east coast these days?

Ashley:
Well, just a little update on my dead knee. I had surgery again on Tuesday, so two days ago where they had to go in and clean out all the scar tissue from my MCL. And yeah, so back into PT, I spend six months of physical therapy. I am best friends with my physical therapist, probably the person I talk to [inaudible 00:00:51].

Tony:
Knows all your deep dark secrets now.

Ashley:
Yeah. He’s also really starting to open up to me too. I heard about his sunburn and everything, so. But yeah, so I’ve just been the last couple days, just yesterday, just pretty much zoned out on pain pills and hung out. And today I held off on doing a pain pill, so that I could be a full body of mind. So, if I’m crying by the time we get to the end of our recording, that’s why.

Tony:
That’s why. All right. Well, hopefully your fingers crossed you’re at the end of this journey and you can get back to normal Ashley riding on bulls and hula hooping and all the stuff you did before your knee injury.

Ashley:
Yeah, if you guys last year at the BiggerPockets Conference, me and Tony got pretty wild out there, hula hooping, riding bulls, or maybe just me. But San Diego 2022 is where the BiggerPockets Conference is going to be held. So, makes sure you guys go to BiggerPockets.com/events and check it out and we’ll see you guys there. So, what’s new Tony?

Tony:
Yeah, we just got back from Cabo San Lucas actually. So, I know this episode comes out in June, but we just got past Memorial weekend. So, my wife Sarah and I it’s been like a busy, busy first half of the year for us and we just felt like we need a little bit of time. We’re not doing any work, we’re not doing anything. So, we got away. We went back to Cabo, which is where we got married and we stayed at that same hotel. We had dinner at the venue we got married at. So, it was cool to take some time and just kind of not think about work, but then literally as soon as we get back, on the drive home, the work starts again. We’re in the middle of raising money for our first hotel purchase.
And we’ve just learned a lot through that process. So, talking with all our investors and giving all the information that they need and figuring out all the stuff for the attorneys and the accountants and all that stuff. So, lots of lessons learned. So, I’ll be excited once we’re done with this to maybe do another reply where we can like break down all the stuff we learned going through this process because there’s definitely more to this than just buying like a regular single family house.

Ashley:
Yeah, that would be a great rookie reply to do, even if you’re not even close to doing a syndication deal, as a rookie just kind of figuring out if that’s something you’re interested in maybe in the future too. Be great to hear about that deal.

Tony:
Yeah, for sure. And just last thing before we move on like you said, even if you’re not focused on doing that right now, if your goal at some point is to scale, having at least a baseline understanding of syndications and how they work, I think will be something that you’ll want to start educating yourself on sooner rather than later. One of the very first books I read on real estate investing was about apartment syndication. Before I read all the books about flipping and house act and all these other stuff, it was apartment syndication because I knew we wanted to scale. So, there’s definitely some value.

Ashley:
Okay. So, let’s get to today’s question. This one is actually pulled out of the Real Estate Rookie Facebook group. So, if you have not joined that, make sure you guys join the group and answer all of the questions because if moderators will not let you in unless you agree to the rules and the conditions of being part of the group. So, this week’s question is from Natalie Ann and it’s a two parter. So, the first question is how did you narrow your focus to determine your strategy? I’m all over the place with purchasing a buy and hold and I’m also intrigued by doing a flip and having short term rentals. Tony, you want to start with that question?

Tony:
Yeah. So, Natalie super understandable position to be in. I think a lot of folks as they’re looking to get started in real estate investing, there’s this shiny object syndrome where you see someone having success in this niche, someone else killing in this other niche, and someone making tons of money in this other niche, you’re just like, man, I want to try it all. But I think one of the best decisions you can make as a new real estate investor is to specialize in one type of investing first. Now your question of how do you do that? There’s a couple things that or three things we’re going to look at, it’s your time, your desire, and your ability. So, if you look at those three things that should help kind of point you in the right direction. So, first is time. Some of these asset classes or types of investing are more time intensive than others, right? Like flipping houses and short term rentals are probably more work than a traditional long term rental.
So, think about the time availability that you have. So, time. Next is ability. So, what skill do you have and what type of investing does that skillset lend themselves to you? Do you know how to hang drywall and install countertops and do all that stuff? Then maybe flipping is a great place for you to start. Are you great on the phone and you can sell anything to anyone? Then maybe you start off as a wholesaler. Maybe you’re great at interior design and creating really cool experiences, so short term rentals might be good for you. So, think about where you naturally are skilled at and which one of those types of investing best relates to that. And then the second is your desire, right? So, we talked time, ability, and desires the last piece. So, even if you’re the world’s greatest salesperson, if you hate sales, then maybe wholesaling isn’t for you. So, you want to see where do those three things of time, desire, and ability all kind of intersect and that should help point you in the right direction.

Ashley:
Yeah, I think the biggest takeaway there is what are the resources available to you? Remember this is not a hobby. Yeah, you want to be passionate about what you are doing, but this isn’t a hobby where you’re just going to pick what you love. It’s also what resources do you have available to you that are going to make you successful? So, when I started, I started with buy and hold long term rentals because I was a property manager for long term rentals. I worked for an investor who did long term rentals. I knew what to do. I had access to his resources.
So, look around just like Tony said, maybe if you are into construction, you know how to rehab a property. Maybe BRRRR or flipping is meant for you if you can do those projects yourself or you can easily manage one of those projects. So, I think sit down and actually write out of a list. What are the resources you have available to you and then how do they apply to each strategy? And then also look at, okay, so maybe it’s close between two, which one are you passionate about? Which one do you get more excited about? And after I built my strong foundation of buying properties, I was very lost as to like, okay, where do I want to go now? Shiny object syndrome everywhere. I went to different conferences from self storage to mask your minds on commercial real estate and just like all over the place, not knowing exactly what I wanted to focus on.
And then I was talking to somebody about the different niches and what I was thinking of. And when I talked about campgrounds, they told me I just lit up. Like that was what I was passionate about, but I had gotten that strong foundation built of something that I could accomplish, those long term buying hold rentals, then I went off and really and pursuing what excites me, what I’m interested in. So, I think take it with a grain of salt. And even if you’re not going to do the thing you’re most passionate about and have fun with and love right off the bat, that’s okay. Find what you’re going to be most successful at first and build that foundation so that you can go off and play with what other type of real estate you want to.

Tony:
Yeah. Ashley, you bring up such a good point about building that foundation. And for us, when we started investing in short term rentals, we literally told ourselves or I told myself this, that I want to focus on this one asset class for the next five years because I want to become an expert in this one thing. And similar to you in terms of building that foundation because when you go really narrow and deep on one type of investing, the success you have I think compounds because all of your energy, all of your attention, all of your focus is on this one thing and getting really, really good at that one thing. So, people always ask me Tony, how did you scale so fast, and this that, and the other, and you’ve got this big portfolio short-term rentals in a relatively short period of time.
And it’s because that was the only thing that we were focused on, right? So, from the time that I woke up until the time that I went to sleep, the only thing that I was thinking about when it came to work was building our short term mental business. And when you have that kind of laser focus, it allows you to scale and grow a lot more quickly. So again, shiny object syndrome. I know it’s a real thing, but try and have that discipline to pick one thing and just go all and in at it.

Ashley:
So, the second question that Natalie had was how did you get good at analyzing deals? Practice, practice, practice, making mistakes. My first property I ever purchased, I forgot to include snow plowing. I live in Buffalo, New York, obviously the driveway needs to be snow plowed. And I forgot to add that in. And yeah, it didn’t kill the deal. It didn’t kill our cash flow, but it still wasn’t what I had projected it to be. And I had taken on a partner with that deal, so just from gaining experience from practicing analyzing deals and also looking at other people’s deals. So, looking at how they are analyzing it. So, joining Zoom calls, webinars where people go through and show you how they are analyzing deals, you’ll pick up so many tips and tricks and also just the biggest thing I can say is don’t fudge the numbers, verify, verify, verify.
So, if you want super accurate numbers and you have no idea what the insurance expense is going to be on a property because you’ve never bought in that market before, go to an insurance agent and ask them to estimate it. It is free. You don’t have to pay anything to have that done. So, verify as much information as you can to become really good at analyzing deals, then it will just be okay, I know this type of house in this area, the insurance per year is about $800 a month. So, I can use that as my number knowing it may be a little less or a little more than that, but that’s the average cost. So, definitely the experience is a good way to get good at analyzing deals.

Tony:
Yeah, and they say repetition is a mother of skill and I think that applies to analyzing deals completely. But I also think Natalie, that once you answer the first part of your question about which type of investment do you want to focus on, then getting good at analyzing becomes a lot easier. But if you’re trying to analyze multiple flips and then multiple long term, multiple short term, this wholesale deal, now you’re spread really thin on building that repetition. But if you answer question number one and say, “Hey, I’m going to do flips and that’s going to be the thing that I do.” Then you can say, “okay, every property that I look at, now I’m getting that repetition in of analyzing a deal as a flip.”
And once you’ve had that decision, it almost becomes like second nature. When I first started investing and we were buying in Shreveport, I knew the zip codes that I was looking at like the back of my hand, right? We were looking at 71104 and 71105. Then I could tell you what was a good price for properties in each of those zip codes, what they could rent for. When you really narrow in, it becomes easier to get better at analyzing those deals.

Ashley:
Yeah, you get a lot quicker once the things you can zoom through them, analyzing them, or even just looking at the property and be like, yeah, I know that this isn’t going to work for me. Even if I offer a $100,000 below asking price.

Tony:
Like Ashley, I’m sure you could in your neighborhoods where you invest, you probably wouldn’t even really have to analyze a deal per se right now to know whether or not you want to put an offer. And you could see, okay, I know like.. I mean, right? Like, am I right? Or do you like-

Ashley:
No, you’re exactly right. I’m going to look at a property tonight where someone texted it to you this morning and I was driving and I was going through my just thinking about it and I analyzed it in my head, be like, okay, this is what I think the rehab would be, this is what we-

Tony:
Totally, and same for us. We’re in Joshua Tree, like I can look at a listing and pretty much ballpark what we’re going to profit on that property as well. So, Natalie just the repetition is where you get really good at analyzing deals. And then I think the last thing is don’t be afraid to if you have other investors in your network, share your analysis with them as well, right? Or even posting in the Real Estate Rookie Facebook group. But I think if you can get some feedback from other investors that maybe gone down that path and like say that you’re a new investor in Buffalo, you post in the group and you don’t have snow plowing, there is one of your expenses. Ashley, one of the other experienced investors can point that out for you. So, repetition but then also trying to get some feedback from folks that have done it once or twice before.

Ashley:
Okay. Well, thank you guys so much for joining us for this week’s Rookie Reply. I’m Ashley at Wealth From Rentals and he’s Tony at Tony J Robinson on Instagram. And we’ll be back on Wednesday with a guest. See you guys next time.

 

 

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How to Choose Your Real Estate Investment Strategy is written by Real Estate Rookie Podcast for www.biggerpockets.com

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