Has Your Investing Strategy Gone Stale?
It goes without saying that real estate investing has become a very competitive industry. Between flippers, wholesalers, buy-and-hold investors, and out-of-town buyers, it is a real challenge to grow your portfolio.
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Couple this increase in demand with the decrease in inventory and business growth seems nearly impossible!
Now is not the time to quit, however. Instead it is the time to look deep into your strategy and evaluate where and why you are struggling.
It’s time to ask yourself if your strategy is still working—or if it’s stale and in need of an overhaul.
Does Your Investing Strategy Need an Update?
You have two fundamental options when looking to update your strategy. You can stick with your current plan, improve the parts that are under-performing, and continue to compete in the saturated market (red ocean).
Or you can shift your strategy, think about the problem in a new way, and focus on a market with little competition (blue ocean).
Let’s dig into these options to understand how you can apply this to your real estate business.
Compete Differently Where You Are (Red Ocean)
To compete differently in your current market requires adjustments within your existing business model. You are not seeking to create a new model; you are instead looking within your current model to find the areas that need fine-tuning. If you are struggling with generating leads or closing deals, here are some examples to illustrate the idea.
Your marketing strategy is the part of your business where you are letting the world (or at least your market) know you are a buyer. This is how sellers can find you even if you have never crossed paths.
It is also how you can find potential properties that are not yet for sale. Such marketing strategies include direct mailers, calling campaigns, and even signs stapled to telephone poles or staked in the ground.
If you are relying on any of these tactics, it is first important to track the success you are having with them. Marketers often test a variety of advertisements in different markets targeted to different audiences to see which message connects best and generates sales.
Take this same approach with your real estate marketing campaign. Rather than sending the same mailer to 10,000 addresses, create five different fliers and send them to 2,000 addresses each.
Then, most importantly, track the response rate you receive from each type of mailer. Once you have identified the version that is generating the most responses, repeat that message to the other target addresses.
This example illustrates that you are still competing within the same market as before, but you are experimenting with different strategies within your marketing process to compete differently than you were prior.
Sending mailers is labor-intensive work. You want to make sure every minute you spend has the greatest possible chance that a lead is created.
Your strategy to generate leads may rely on networking with others to find properties for sale. Getting an early tip on a property about to come up for sale is to your advantage.
One obvious networking approach is to connect with other investors. Joining local real estate clubs and attending meetings are very effective ways to build relationships with other investors. However, if you find that you are not receiving the type or quality of leads you want from other investors, consider expanding your network.
Move beyond the investor community to others in business. Consider joining a group of local business owners, talk with area Realtors, or get involved with a community-focused organization in your target neighborhood.
This fresh perspective and broadened network can offer a new source of information and potential leads. One word of caution: seek groups that connect with your interests and where you can add value. Participating in organizations just so you can get something from them is inauthentic and you will turn people off immediately.
These examples show how you can adjust your strategy within your existing investment approach. You can continue to invest in the same types of properties and in the same markets, but you are finding ways to make adjustments within your business model.
Compete Somewhere Different (Blue Ocean)
If you find the above adjustments are still not producing the growth results you are looking for, it is probably time to think about competing in a new way. This shift in strategy requires you to think about the problem differently and focus on a market with little competition.
Here are some examples to help explain how to think about real estate investing through a blue ocean strategy.
New property type
One way to refresh your strategy is to look for a type of property others are overlooking. If everyone is looking for 2-bed/1-bath homes in your area, find the type of property no one else is considering.
Maybe there are 5-bed/3-bath homes that could be converted to multifamily, and you can bring the vision and construction knowledge to complete the transformation. Or maybe there are retail properties with loft apartments on the second floor, and you understand more than most how to build-to-suit and find businesses looking for a storefront in the neighborhood.
It takes creativity, legwork, and research to move to a new property type. But as with most things in life, extra effort is rewarded with increased opportunity.
Drive through your target neighborhood with a fresh set of eyes and ask yourself, “What am I missing?”
Where do you see the neighborhood going? What do you believe others are overlooking? What is the least obvious approach, and why are others missing the clues?
Your strategy may need to go beyond looking at your current market in a new way. It may be time to expand to a new market.
The new market could be within your metro area, possibly a township you have not considered before. The new market may even be in a different state. Either way, expanding your geographic focus can give your strategy a boost.
It is important to stay focused on your vision if you are considering a new market. Shiny new opportunities could take you off track and lead you to investments that do not align with your goals.
If you do consider expanding to a new market, be sure to ask yourself these questions:
- Does it align with the types of property I want to buy?
- Will it help me serve my target tenant?
- Can it produce the financial results needed to meet my goals?
A word of caution: don’t get lured into the “hot new market” just because everyone else says they are finding success there. If it doesn’t align with your vision, it’s probably not the best move for you.
Create something out of nothing
This shift is the most exciting in my mind. It requires you to re-frame the situation in a completely new way and stretches your creative thinking. Here you are creating a solution to deliver the product to your target market in a way that doesn’t already exist.
For example, instead of only looking for residential properties or multifamily structures, look for commercial properties that could be re-zoned and converted into rentals. Or instead of competing with the masses for distressed properties, look for in-fill lots ready for new construction.
Take notice if you start to create excuses and place blame for your stalled growth strategy. This could be a signal that your strategy needs a refresh!
Market conditions change. Competition changes.
Ask yourself whether your current approach is the best fit for today’s reality. Evaluate whether your strategy needs small adjustments within the current market or if it needs larger changes to compete in a different space.
While a blue ocean strategy shift may seem appealing, be mindful. Do not take lightly the effort and preparation required to move in a completely new direction. The larger the strategic shift, the greater amount of time required to prepare.
On the positive side, as I stated above, effort is rewarded by opportunity. Competing in the same way year after year can build confidence, but it can also build comfort and complacency.
Examine your current situation and ask yourself, “How can I think about the problem differently and not just work harder at the same solution?” You might find some surprising answers to unlock a new phase of growth.
Do you think your investing strategy has gone stale? If considering an update, will you employ the red ocean or blue ocean method? Why?
I’d love to hear from you in a comment below.