What All Newbies Should Consider BEFORE Choosing a Real Estate Niche

by | BiggerPockets.com

How often is there a post on BiggerPockets from a newbie saying they are overwhelmed by all the information out there and how do they choose what to invest in? Think about all the different options:

  • REIT
  • Buy & Hold
  • Lend Money
  • Tax Liens
  • Buy Debt

These are different techniques of investing in real estate, but to be honest learning the strategies is probably the easiest part of investing in real estate. Go to the library and you can find any number of books on investing in real estate in exactly the way that you want to learn how. You can look here on BiggerPockets and find almost any piece of information in the Forums. The techniques are well documented. What isn’t well documented is why are YOU investing in real estate?

How to Invest in Real Estate While Working a Full-Time Job

Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.

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Figuring Out Your “Why”

For simplicity’s sake, there are only two forms in which you can invest in real estate. You can either invest in real estate from an equity perspective or from a debt perspective. There are many different variations and combinations of these, but for this article, we are going to limit the variations.

Before you can determine what the right investment strategy for you is, you have to determine the “why.”

  • Why are you investing in real estate?
  • Are you tired of your job and want to start a new career?
  • Do you love your job and would like some supplemental income?
  • Are you looking to diversify out of stocks and bonds with real assets?
  • Are you doing it because your cab driver said it was a good investment?

Real estate investing is both an investment and a business. If you don’t know why you are getting involved in it, you could end up stuck with a business that you didn’t want or vice versa. Think about it: You are in a job you love and have excess cash that you are looking to invest. You want to slowly build some passive income. Why would you run out and buy five distressed properties with borrowed money from your friends? Do you have the time or desire to manage that? Probably not. But there are plenty of people on BiggerPockets who are professional real estate investors telling newbie investors that they should do something like this because the turnkey provider they want to buy from is going to make money on the transaction.

Related: 4 Areas Newbies NEED to Master For Real Estate Investing Success

Do you not buy toothpaste at the store because it is cheaper for you to make it at home?

Once you figure out the “why,” you need to figure out what resources you have. The types and amount of resources that you have will have a huge impact on the strategy that you choose. If you have no cash, it would be hard to be a private lender. If you have no time, it would be hard to self-manage some rental units. If you have cash and time, then the world is your oyster.

Lastly, a concept that should probably be discussed more frequently is risk. There are two pieces for assessing your risk tolerance.

2 Pieces for Assessing Your Risk Tolerance

Ability to Take Risk

The first piece of risk tolerance is understanding your ability to take risk. You need to figure out what your position in life is. Part of this will be determined by your age, and the other part will be determined by your income and net worth. Typically the younger you are, the more risk you can take. Also the more money you have, the more risk you are able to take. This comes from the idea that the older you are, the less time you have to recover from a bad investment.

Also in general, if you have more money, it would be easier for you to recover from a mistake. Another thing to consider when determining your ability will be what you need the money for. For example, if you have your child’s college tuition coming up next year, you probably should not invest in a syndication that has a five-year lock. Your need for the money reduces your ability to take risk.

Related: 6 Easy Ways to Be Taken Seriously As a Newbie Investor

Willingness to Take Risk

The second piece of assessing your risk tolerance is your willingness to take risk. This is more subjective than determining your ability. There is no absolute measure. There are questionnaires that you can fill out to help you determine your willingness, but sometimes this is not very effective unless you have experienced significant financial losses or gains.

Conducting the risk analysis diligently can help you make the right choice. The thing is, a lot of newbie real estate investors get carried away by listening to all the success stories. But you need to realize that there’s a lot of hard work and planning involved behind it. You can’t just jump into the pool because you like water. You need to learn the basic steps and take it from there.

Newbie investors: What’s your “why” for investing in real estate? How are you going about finding your niche?

Leave your comments below!

About Author

Mark Ainley

Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark found his way into real estate by purchasing and flipping condominiums prior to the great recession, and since, he has built his own portfolio of rentals alongside co-founding GC Realty & Development LLC (GCR&D), a full-service real estate brokerage, property management and investment firm, and GC Realty Investments (GCRI). He has rehabbed and stabilized over 450 properties and currently manages over 900 investment properties throughout the Chicagoland area. Mark was featured on CNBC’s TV show The Deed, which chronicled one of his rehabs. He has also been featured on podcasts like The BiggerPockets Podcast, The Real Estate Mogul Podcast, Joe Fairless, REI Diamonds, and Positive Phil.


  1. Matt Mortensen

    It’s similar to developing your talents on a sports team. You cannot specialize in a position on the field until you have grasped or mastered the skills required to compete with everyone else in the game. I constantly hear people who are hellbound to be a wholesaler and only a wholesaler. That’s what they are going to specialize in and they know this before the inception of their investing career.

    So, I’m soooo glad you shared this opinion! Because it’s most likely gonna be a stumbling block to investors success because at the end of the day they are only limiting themselves.

    Thanks for sharing!

  2. Molly Goldsmith

    Good reading! Thank you.

    My “why” is financial independence in 10 years. This whole niche finding is fascinating to me. I really want to try it all. I do plan to quit my current job within a year and enter into a real estate related job. I want to apprentice/work/explore all aspects of real estate investing so that I can find what I’m good at. I bought into this whole “put your investment money into stocks/bonds” and I’m not a fan. The more I binge listen to podcasts and read the recommended books the more excited I get. I could never not work but I’d rather work for myself.

    • Mark Ainley

      Real Estate is so exciting to me because there are so many ways to make money. In our operation now we find and consider many different ways weekly that we can make money long run or rip off a $30,000 profit in a few months. What really excites me is every day is different and the challenge is the different economic markets.

  3. Andrew Syrios

    I definitely think more investors should put more thought up front into what they are looking for. Maybe you’ll change your niche or goal along the way, but it’s very dangerous to switch back and forth between niches are try to do it all. Shiny objects are often deadly. It’s critical not to be a jack of all trades but a master of none.

    • Mark Ainley

      Andrew thanks for the reply. In my 12 years in RE I started by learning a little about everything and in recent years moved to mastering just a couple of things but have the knowledge of what goes on around me and how others make money in this industry.

  4. Jon Buist

    I agree with Michael Helton, the “Why” is more important than the how. For me the why is what is going to drive me & keep me motivated. I have spent far to long away from my family over the years with my career. For me personally, I owe my family me. That’s my why.

  5. Clayton Rehmus

    I think this is phenomenal investing advice for any avenue, not just RE. It’s funny because in a local investing group that I go to the question was posed, why do we do what we do when we invest. Several of the people couldn’t come up with an answer better than “to make money.” Clearly that’s the objective, but that’s not the answer as to what we would do with that money.

    • Mark Ainley

      Just like we see so many posts on BP about doing due diligence into a specific property or project the same attention needs to be put into they “why” so people understand clearly what they are getting into. Especially when people are putting all their eggs into one basket by jumping into a new career. Thanks Clayton!

  6. John Teachout

    We do buy and hold as we’re trying to achieve an income stream for when we retire about 10 years from now. The equities market has not been kind to us and we stopped putting funds into our IRA accounts about 10 years ago. Interest rates in the fractions of one percent finally drove us to develop a different plan. Real estate has been something that’s been an interest for years and now that our kids are launching and we’re not spending our time attending sports activities, it’s time to start some serious planning for the future. I’ve been reading a lot of articles, blogs and trying to pick up info here and there. I’ve no illusions of instant wealth and have always had a slow and steady approach to finances. At this point, we own two pieces of recreational acreage and 4 sfh besides our own house. 3 of the rentals are still being refurbed but we hope to have 3 of the 4 rented yet this year. We do all our own work because it’s cheap and we know how, having extensive experience in handyman stuff. Real estate is a bit like diets in that there’s tons of books on the latest and greatest but the fundamentals don’t really change and despite claims, there really isn’t anything “new” either. I am not concerned about losing my shirt in this endeavor but it is a lot of work.

  7. Christy Greene

    Right now, I am in the “due diligence” part of this multiple streams of income plan for us. I am trying to read as much as I can and find out what is a good match for us. I stepped out of the corporate world and started my own business..check. My husband stayed in giving us the stability of income and insurance while I got started. My business is eight years in and doing well….check. W e are now looking into real estate. I think I am leaning toward a higher rent niche since I see that from reading blogs, the lower rentals may prove to have higher profit margins but a higher hassle factor. Given that we are new to the rental industry, and that we both have other businesses to maintain, we don’t have a lot of time. We are also thinking of “house hacking”. Given that we live in Southern California where, the market can be volatile, we are still looking for what makes sense. I find myself leaning towards properties that I would live in, wanting to deal with renters who are similar to me…responsible. pays on time, willing to pay higher rent for comfort, convenience and safety for my family. I know it is easier said then done. I have a lot to learn. We are selling our high end home and starting the journey…check!

  8. Jared Madsen

    Really a great post Mark! As a newbie investor with very little seed or start-up capital and no real support network… It’s just me man; no wife, no parents, no family members or friends with deep pockets, no pension, no 401(k), no retirement nest egg of any kind, living hand to mouth basically, and yet tied down with a plethora of family heirlooms, some of which I have been diligently trying to find viable markets for without much success thus far…what you said in your post really puts my real estate desires in greater perspective. I have been struggling trying to figure out the “how” for the past year and have not been focusing on the “why.” To say the least trying to figure out the “how” has created unnecessary fears, some call paralysis from analysis, and has caused me to be risk adverse. But when I focus on the “why” I realize that all I’m doing is taking risks that have no potential pay day at the end of the day. It’s time to change all that and I thank you for providing the incentive to do just that. Any other insights you might be willing to impart to this newbie I will be more than grateful to receive with open arms. I’m all ears!

  9. David White

    Thanks for writing this article. My “why” revolves around me wanting to get paid for my work/hustle and make money for myself. Rather than get paid by the hour and make money for someone else. But I am going to keep my full time job as I ease my way into REI. Maybe down the road I can do it full time. So I would say I want to supplement my income. I’m also trying to learn as much as possible and gain experience doing a little bit of everything before I can settle on 1 niche of real estate. I guess I should start by learning more about investing in tax liens. I have no idea what that entails.

  10. Luisito Espanola

    Thank you for your article. It’s very helpful. I’m a newbie and I want to start on the right foot. I guess my why is I want to learn how to have a lot of money and time to spend. I’m getting older and I have always worked hard and have made nothing. I appreciate people like you who wants to help others learn how to succeed.

  11. Shanel Wiggins

    My “why” is for financial freedom, to be in control of how much money I can make, to be my own boss and I enjoy viewing homes inside and out. As a child my mother moved a lot and it was fascinating looking at new units. But, my drive for REI is to work for myself.

    I am a newbie who’s in the “research” phase. I have obtained a few books to read and I’ve been reading articles that are related to my interest. BP is where most of my research has been consumed of from podcasts, articles, and the forum.

    My focus is buy & hold and I hope to connect with some of you who share similar interest!

  12. Julie Rogers

    First I would like to thank you for your time spent on the article. That is what impresses me about BP, the people with experience giving their time to help other people.

    My why? I had a little money! My better half, well today, that guy, said, I had to put it in real estate because of our other investing experiences. So I bought our first property, rehabbed and leased. Guess what, and this confuses me, our cap rate is 17%, or at least what I paid for the property and what the NOI is. Of course, if you use the market value, the cap is 10%. Hmm. And that is my confusion. 10% is not bad, but this correct cap gain does not reflect the 30% made on the buy plus the 17% return on investment. Plus the article I read yesterday on BP talked about the tax saving from the property.

    Any way, my real why “now” is the later part of the above discussion. I hope to have 2 more properties owned by the end of January with similar, if not better returns, after rehab. The largest reason for our buy profit, is I only buy distressed properties, I do the rehab myself.

    i would like to add that BP helped me immensely with my first purchase.

  13. Frank Mooradian

    Nice article.
    I suppose I have a couple reasons for getting into REI. I want to continue with music, & do stand-up comedy. I also want 4+ kids, & I’m 36 with no wife. I’m just starting a career that was basically chosen to have money to invest, so I want to cycle out of it over 10 years, while having kids, & cycle into stand-up after my last child turns 7 since that’s basically when all the attachments have formed.
    So, I’m alright with beginning slow. The fastest I can see myself move is 1 house-hack a year until I require a property manager. I’ll probably ramp it up after the last kid turns 7 since REI is also FU-money for stand-up. Oh & throw some martial arts in there. I have to eventually make this as passive as I can, so I want to learn the systems slowly & properly.

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