Which Real Estate Investing Route Should You Go?

by | BiggerPockets.com

I see so many questions in the forums and in general from people just getting started and trying to figure out which route to go with investing. The problem is, it is almost impossible for anyone else to answer that for you. Reason being, no one knows what is best for you better than you do but usually because more so the answer depends on your goals and you may not even know those for yourself yet.

There are a million different ways to invest in real estate. Okay maybe not a million but there are so many ways that I could never list them all out. I probably don’t even know them all actually. There are investing methods that are right for you and the trick is to find them. I’m a big advocate of the best way to figure out your niche is to find what resonates best with you by letting the method find you rather than you find it. Your job is to do as much research as you can, try different things, and constantly push towards succeeding with something and eventually you will fall into a rhythm with your best niche.

What are the basics though? How do you know which avenue to start pursuing in order to learn more ways of investing, especially the less obvious ones? I think it makes the most sense to first look at the most general categories of investing methods, the ones you hear about the most. Start with one of those, continue to pursue that route, and you will gradually learn more and more about related options and you can tweak your system as you go from there.

General Real Estate Investing Methods

What are the most general methods? If I were to pick, I’d say the following categories encompass just about every method out there:

  1. Flipping
  2. Wholesaling
  3. Rental Properties
  4. Paper/Notes

Each of these general methods, and all of their associated more specific methods, accomplishes different things, offers different benefits, and requires different levels of involvement and risk. If you understand what each of these methods offer, you can choose the one that best fits your needs (and wants) and you can make that your starting point.

I’m going to break down the realities of each general method and then you can match which method most fits with your goals and comfort levels.

Understanding Each Method

My goal is to keep my explanation of each investing method very high-level. That is all you really need to get started anyway since complicating things will just cause you to overwhelm yourself. So I’m going to specify each explanation by including the purpose of each method, the upsides and downsides, the risks, and the involvement levels required.

1.       Flipping

Purpose: Flipping is the best way to get the most amount of income the fastest.


  • A lot of cash in a short amount of time
  • More ways for creative financing
  • Can be done in most markets


  • High tax penalties
  • Contractors can be difficult to manage
  • Risk

Risk level. High

Significant risk items: Unexpected repairs (can significantly time and budget), inability to resale

Involvement level: High

More Information: House Flipping: The Best of BiggerPockets 

2.       Wholesaling

Purpose: Provides income with little money to start.


  • Little to no money required to start with high income potential
  • Can be done in any market
  • Doesn’t require management of contractors or tenants


Risk level: Low

Significant risk items: Potential legal hiccups depending on state laws and situation

Involvement level: Very high. In no way do I even consider this “investing method” actual investing. It is a job. It is not investing. I only mention it as a method because so many people see it as an investing method and the large majority wants to start their “investing” careers with wholesaling. But it’s not an actual method of investing. Be clear on that. You will gain an atrocious amount of excellent knowledge that you will be able to use when you do start investing and it is 100% related to real estate investing, so there is nothing wrong with it but realize it is a job and a means of acquiring capital that can be used for investing rather than actual investing.

More Information: Wholesaling Real Estate Basics

 3.       Rental Properties

Purpose: Long-term passive income.


  • Significant tax benefits
  • Passive income versus active income, i.e. way less work


  • Income comes over a longer period of time in small increments
  • Can’t be done in all markets
  • Tenants can be really annoying and cause you to lose faith in humanity
  •  Financing can be more difficult

Risk level: Medium

Significant risk items: Tenant damage, property maintenance

Involvement level: Zero to High. Zero to low if you use a (good) property manager, low to high if you landlord the property(ies) yourself.

More Information: Buying Rental Property: A Step by Step Guide

 4.       Paper/Notes/Liens

Note: I have no experience with investing in paper, notes, or liens. Therefore I have little information to fill in these blanks, so don’t take this one for gold. Any investors who have experience with these, please leave comments to help summarize this style of investing (or to edit my answers)!

Purpose: Passive income, typically over shorter amounts of time.


  • Secured liens
  • Less capital usually required to start
  • Passive income versus active income, i.e. way less work
  • Doesn’t require management of contractors or tenants
  • Can be done in all markets


  • Lack of liquidity options, if any
  • Lack of control

Risk level: Medium

Significant risk items: Owner declaring bankruptcy and title issues (tax liens), risk to personal credit (notes)

Involvement level: Low

More Information: Five Advantages of Note Investing


There is obviously a lot of detailed information on each investing method not included here, but the point is to give people newer to investing a general feel for the purpose and risks of each route they can choose to take. The first step is to know your own goals and how much time (and mental capacity) you have, or want, to dedicate to real estate investing.

Real estate can be as passive as you want it to be or as intensive as you want it to be. The spectrum is huge! If you don’t pick out a starting point, you could be doing circles forever. That is not to say that if you pick one method that you can’t do another, and you may eventually work multiple methods in conjunction with each other (which is really smart), but to start out keep it simple. By choosing the route right for you, you will be able to focus in on who the experts of that field are, learn from them, research that field, and gain a solid foundation in one method before moving to the next.

If you are still unclear as to which method to focus on, read through BiggerPockets blogs and forums and if you see someone who is writing about something that interests you, reach out to that person! That is what BiggerPockets is for- networking and learning!

Happy investing!

Photo Credit: bitznbitez ( was lucias_clay ) via Compfight cc

About Author

Ali Boone

Ali Boone is a lifestyle entrepreneur, business consultant, and real estate investor. Ali left her corporate job as an Aerospace Engineer to follow her passion for being her own boss and creating true lifestyle design. She did this through real estate investing, using primarily creative financing to purchase five properties in her first 18 months of investing. Ali’s real estate portfolio started with pre-construction investments in Nicaragua and then moved towards turnkey rental properties in various markets throughout the U.S. With this success, she went on to create her company Hipster Investments, which focuses on turnkey rental properties and offers hands-on support for new investors and those going through the investing process. She’s written nearly 200 articles for BiggerPockets and has been featured in Fox Business, The Motley Fool, and Personal Real Estate Investor Magazine. She still owns her first turnkey rental properties and is a co-owner and the landlord of property local to her in Venice Beach.


    • That’s the perfect combo Mark! I heard someone say once they recommend investors start with rentals before flipping so that by the time they make the big bucks from flipping, they understand where they should put those bucks. I know of so many people that made bank when the economy was good by flipping houses but during the crash they ended up with nothing. All because they just spent the money they made instead of investing it into passive investments. Makes total sense.

  1. “Tenants can be really annoying and cause you to lose faith in humanity”

    Ali, you crack me up. I think this line was spoken from some serious experience! Great article, I really like how you’ve broken things down and estimated risk and involvement.

  2. Excellent answer to a common question, Ali!

    If only we had a crystal ball and knew what our destiny would be. Though, what would be the fun in that?

    To be honest, I think it’s more of a question of “why” rather than the “how-to.” With information becoming so easily available, a lot of folks get so wrapped up in the “how-to” that they forget the “why.” But, it’s the “why” that drives passion and keeps folks from going on no matter what. Once folks figure out the “why” then the “how-to” will come with enough experience and time.

    Never in a million years did I think I’d end up in the niche I’m in. When I first started out, I went right into bird-dogging and then wholesaling. From there, I knew I eventually wanted to buy and hold. Though, I was set on the belief of buying homes then turning them into one big hotel as in the game of Monopoly. I thought multi-family was the way to go.

    As my real estate investing career progressed, I met more and more folks in the multi-family realm learning more about this asset class. What I learned was that it just didn’t seem like a fit for me — my gut was telling me it wasn’t going to mesh well with my personality and overall goals. So, I decided not to go down that path.

    The path that found me took awhile. In fact, it found me twice in my career. Though, the first time I thought it wasn’t for me due to one bad experience. It took many years of being a landlord for me to re-visit this path again. However, this time I had something to compare it with due to my experience. Before then, I did not.

    So yes, experience does play a role. And, you’re right — many times the path may find you. The important thing is having an open mind to seize opportunities when they present themselves.

    I like these write-ups when you address common questions. When they come up, folks can just relay back to these posts – neat idea! 🙂

    • Thanks, Rachel! Well and to add to “helpfulness”, I would put your comment in that category! This comment is perfect for new people to read to understand how the learning process can go and how many turns it can take. Thanks for sharing!

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