As new and/or inexperienced investors, we often spend countless hours reading books and scouring the internet to learn everything possible about a particular real estate investing strategy. The value of education cannot be understated. New investors should not enter into the world of real estate without first achieving a high level of understanding about the industry. That being said, most of us agree that education eventually reaches a point of decreasing returns. There comes a time within our education process where taking action is the only true logical next step.
One major influence contributing to our reluctance to take action can be found in the difficulty to choose the best investing strategy. Beyond the three major real estate investing strategies (wholesaling
, buy and hold), there are countless sub-categories and niche strategies that seem appealing to the new investor.
Because information related to these specific categories is readily available and very inexpensive, we often find ourselves exploring various potential paths for our business. BiggerPockets is an amazing resource for exploring these different options. Nonetheless, the best and brightest on the BP platform often echo a similar and extremely simple piece of advice: “Just start.”
Related: How to Create a Standout Business in a Sea of Real Estate Competitors
I suggest new investors spend less time deciding on an investment strategy and more time analyzing
and purchasing property
. In reality, the investing strategy you choose at the onset of your career matters little in your path to long-term success.
Don’t be Paralyzed by Your Goals
I am a big proponent of goal setting in every aspect of my personal and professional life. Setting tangible goals allows me to focus my energy on specific tasks and hold myself accountable on a daily, monthly, and yearly basis. That being said, we should all be aware that our long-term goals are simply a guide and will undoubtedly need to be tweaked, if not completely re-written, in the future.
Consider the following question:
“Where do I see myself in five years?”
It is probable that your answer to that question will be drastically different than what reality has in store for you.
The world of real estate is changing far too fast for any one of us to know exactly where we will be in five years. If we remain tied to long-term goals, we may fail to act on opportunity to pivot and better position ourselves for long-term success. This is exactly why I suggest we underplay the importance of choosing the “right” investing strategy.
The strategy you choose at the start of your investing career should be seen as little more than an opening door. While it’s very possible that you will be successful and continue to grow in a given niche, its more likely that your investing beginnings will lead you in a new and exciting direction. This new direction is a path that you might be blind to as you start investing. It isn’t until we begin working in the reality of the industry that our eventual calling is revealed.
If I were to answer this question above five years ago, my answer would have looked something like this:
“In five years, I will have quit my full-time corporate job, and my real estate business will flip 12 houses per year.”
While the first half of my answer became reality, my real estate business has taken me in a completely different direction! Our business has pivoted to a growing rental investment portfolio, as well as a general contracting business focusing on renovating older homes. In addition, we are working on various software as a service (SaaS) platforms to help other investors grasp the confusing intersection of real estate and technology.
I certainly would not have predicted ending up on this path. However, it wasn’t until I started actually flipping houses that I met the network and developed the interest and skills to pivot my business.
Treat Your Business Like a Startup
A common term used in Silicon Valley startups is the “Minimal Viable Product” or “MVP.” The MVP is defined as the bare-bones product to ship to users/customers so that you can gain as much feedback as quickly and as cheaply as possible. Consistent with the ideals of The Lean Startup
by Eric Reis, businesses are embracing the power of an iterative business startup. While we may have a hypothesis of how our business will work and what our customers will want, it isn’t until our product or service is tested in a real marketplace that we gain the information required to iterate. Your MVP is the simplest form of your chosen strategy that will provide you with immediate feedback with which to make your next set of decisions.
I suggest you treat you real estate investment business as a startup. Going further, you might not even want to call your business a “business” until you have a few deals under your belt. Begin with an idea of what strategy might work best for you. Do your best to analyze that strategy and jump in as quickly or as cheaply as possible.
“Jumping in” does not have to mean that you blow hundreds of thousands of dollars on a bad deal! This can simply mean partnering with an already active investor or focusing in markets where your downside is completely manageable. It isn’t until you see how you personally interact with a live marketplace that you realize your strengths and interests within the industry.
Related: 3 Habits of Incredibly Lucky People (For Better Fortune in Business & Life!)
The days of researching, writing, and pitching a business plan before you have customers are over. While you may eventually write and present a business plan, you will most likely have achieved some level of success before scoring a meeting with investors.
As serial entrepreneur and author of The Startup Owner’s Manual
, Steve Blank
says you must “get out of the building” to truly understand what your customers want and how you can add value to the marketplace.
Move From “I Want To” to “I Do”
Making the leap from “I want to invest in real estate” to “I do invest in real estate” can be one of the most challenging decisions of your career. We can spend several hours tinkering with the “perfect investment strategy” while others are out there making deals. Many of us find comfort in reading “just one more book” before getting started. Books are great — but they don’t compare to real world experience.
If you’re like me, you’ll look back on your decision to buy your first property and/or quit your full time job and say, “I wish I would have done this sooner!”
Your path to real estate success is out there. You just need to get started to see where it leads.
Investors: What do you think of this strategy? How flexible is your business plan?
Let me know with a comment!