Why are you interested in real estate?
What is it going to help you achieve or do?
What are your goals?
These three questions are the first questions you need to ask yourself before you even get started. Once you have defined and answered these questions it well help you decide what strategy or approach to take.
Side note: To me what is your why? Is a lot bigger than real estate. There is a great ted talk that you should check out. Link Here
What is your WHY?
Are you looking for a lump sum of money to pay off some debt or take a vacation? Are you looking for away to cover your mortgage? Are looking for away to retire early? The list of WHY goes on and on. You just need to decide what is your why?
Here are some examples of some WHY’s:
- Are you tired of the instability of the stock market and want to invest in something more stable and predictable?
- Are you looking to build a passive income stream to eventually replace your current income?
- Are you just looking for long-term appreciation?
- Are you trying to create a full time income right now?
- Are you doing this for fun and the challenge? Do you like Chip and Joanna Gaines, and do you want to replicate their success?
For me I came up with a handful of WHY’s, but I narrowed it down to two.
1- I learned that I loved everything about it. I loved looking for the deals, crunchy numbers, renovating, providing a place for people to call home, etc. It quickly became my passion.
2- FREEDOM. Freedom both financially and with my time. Real estate doesn’t have to be a 9-5 job and the income possibilities are unlimited. I learned very quickly I was not happy working a 9-5 desk job and someone told me this what you worth/what I am going to pay you. I wanted to determine how many vacations I could take or if I wanted to make breakfast and take my kids to school each morning I could. If I wanted to go play golf on a Tuesday during the day I could. I want determine what kind of life style I wanted to live and real estate has and is a resource to all me to do that.
Full disclosure though as I am writing this post I still work a 9-5 job. Even though I have not been able to quit my 9-5 job yet. Real estate as a loud me to not have chase money and instead chase time and flexibility with my day job.
Once you have determined your WHY here are some questions to ask yourself:
What type of properties do you want to invest in?
There are tons of properties and niches to choice from. You can invest in single family homes (SFH), multi family, condo’s/townhomes, apartment complexes, student housing, vacation home, etc. Are you going to whole sell properties, fix and flip, buy and hold, etc. Based of your “WHY” you will need to decide on what type of niche or property you are going to focus on initially.
I focus on two types of investment strategies. I buy fix and flips to fund my purchases of my buy and hold properties. I do the occasional BRRR property (if you are familiar with bigger pockets then you know what this is) if not here is a link. It is basically a flip that you end up keeping as a rental.
I love the the residual income each month that I get from buy and hold properties as well as the occasional appreciate in the properties. The income I get each month has allowed me to work towards my goals of have my freedom both financially and with my time.
Once you determined your strategy. There are 5 questions that can ask yourself to help you determine your next steps.
Do you want invest locally or are you ok investing in other states?
Every investor is different and personally I think both investing locally and in other markets have there pros. This is really on personal preference and what your ultimate goal is.
For example: Locally there might be some amazing properties to flip, but numbers on buy and hold properties just don’t make sense as they do in other markets. This might take a little research, but with a little homework and maybe reaching out to some investors, agents, or property managers in your market or in a market you might be interested in. You can come to a conclusion on where you want to invest.
Do you want to self manage or hire property management company?
This again is all based on personal preference and personality. This also will be determined on if you invest locally or out of state.
What kind of tenant do you want?
Picking the right tenant is key to a smooth operation. Make sure you do your due diligence and don’t scared to say no. I learn being patient for an extra week or two to find the right tenant is well worth it, then accepting the first person that applies and doesn’t check all the boxes on your requirements.
For me I have 4 main requirements when I am looking for tenant:
- House hold income is 3x the rent
- No Smoking
- They pass a background check
- No previous evictions
other things I take into consideration: Good reference from previous landlord, and work history.
Do you want to pay cash or finance?
This all comes down to your financial situation and goals. For me personally I like financing. If I have a 100k to invest with I would rather put 20% down on 5 $100,000 homes, that each make me $200 per door. Rather than buy one $100,000 house in cash that make me $600-800 a month. I know it might be a little more work to manage 5 house, but I am make $1,000 a month rather than $600-800 a month. Also you have 5 houses that can appreciate for more down the road, rather than just one.
What are your strengths and weaknesses?
This will help decide who you need to network with and help build a good team. You might realize your a good handy man and can handle self repairs, Or it might help you decide if you need to hire a property manager or not, etc.
In conclusion knowing your “WHY” is important not only in real estate, but in life. If you know your “WHY” you can set goals and plan accordingly to meet those goals. Good Luck!!!!!!!
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