I've spent the past few months learning and thinking about the various REI niches and strategies, and I feel like I'm pretty close to making a decision about where to get started. But before I do, I'm hoping to get a little input from the community.
Specifically, I'd like to hear what others think about the headaches associated with the various opportunities. My goal is to find a good fit for my personality and family. This does NOT mean that I am looking for the most passive way to invest right now. It DOES mean that I want to get the most bang for my buck without adding too much stress to the equation.
So without further ado, below is a first pass of some investing approaches beginning with those that I think would be the least stressful:
1. Syndication (least stressful)
3. Buy & hold w/ property management
4. Lease options
5. Buy & hold w/ self-management
6. Rehabbing & Flipping (most stressful)
What do you think? Would you reshuffle the list based on your experience? What would you add to the list and where would you place it?
I would love to see what your list looks like and hear why - especially if you think a particular strategy comes with less stress and the potential for higher returns.
@Aaron Hunt , good list to start and no doubt there will be different opinions. You mention looking to find a niche that works for your situation and family. How would you define stress? Time pressure? Money pressure? Something else?
I will likely be working my W2 job for awhile so I only have so much time. I would say that I'm a fairly low-bandwidth person and stressors for me include things like:
- Business travel. I'm all for a good vacation or road trip but being away from my family frequently or for long periods of time is not good. I currently work from home most days.
- Dealing with tenants.
- Dealing with repairs and upgrades. Our primary residence creates more than enough projects for me.
- Anything fast-paced. I'm a slow-and-steady-wins-the-race kind of guy.
With those criteria, Any other approaches that fit somewhere between lease options and syndications?
@Aaron Hunt all of those things give me a headache at one time or another
Are you looking for a reason not to do a certain kind of investing?
All I know is that I would put up with all sorts of stress if that means that I reach my goals and become successful.
#2-6 is owning a business, your going to have some level of stress depending your ability to streamline the operation, if your up to that task, the stress is all the same. #3-#5 are the same, in one scenario the tenant calls you and you deal with it, in the other the tenant calls the manager, then the manage calls you if needed if it's over your maintenance limit. #2, notes is the same as LL, just no repairs, however you have the collection process. There's always a percentage that do t perform in notes and in rentals.
Yes! I'm looking for the best fit or fits. One of my goals is to be available for my family and certain approaches will take me too far away from them. Some goals can be reached later but I want to choose strategies that, for instance, still allow consistent quality time with my wife and kids along the way. I don't believe it's a choice between RE and family but if it were, family wins every time.
I see the different RE opportunities on a continuum. Some have a greater opportunity for return while others have less. Some require more time, some less. Some involve more headaches, some less.
I believe that there is a sweet spot for me on the continuum and I want to be very thoughtful about where I jump in.
Thanks for the thoughts @Levi T.
I want to treat this as a business and have just recently had my curiosity peaked regarding notes specifically because they don't involve the stress of repairs. I'd like to own some apartments eventually (with property management) but I definitely can't start there.
So - notes seem like they could be a good way for me to get started and move toward apartments. Or, maybe notes are a good long-term strategy alone...
I'm just wondering if there are any other strategies out there that eliminate some of the things that would be headaches for me.
Suggestions are welcome!
Hey @Aaron Hunt , totally get where you are coming from and factoring in your priorities/lifestyle prior to making investment choices. Sounds like something a bit more hands-off might work best for now. You mention that some goals can be reached later... what is your ultimate goal with real estate investing? And then near term goal (such as higher returns, generate cash flow, gain experience?)
I was surprised that you listed rehab / flip as more stressful than dealing with tenants, toilets and taxes.
If you want to be available for your family, that seems paradoxical. As a self-PM, your first obligation is to your properties and their tenants. Consider knocking #5 off your list.
I understand what you are going through as I went through the same thing when I started.
I chose buy and hold with property management because I have a very demanding career (I'm a Federal Agent). I have traveled a lot, just this year I have been away from home for more than two months. I just got back from being overseas. Hands on management just was not the best thing for me.
I'd like to be financially independent within 10 years with the aim of creating generational wealth beyond that. I see owning apartment buildings as a means to the latter, so the question has been: how do I get to the point where that is possible and in a way that is sustainable.
Self-managing properties is not appealing to me and I've been trying to find a way to skip that step.
Hey @David Dachtera
#5 and #6 would create the most headaches and stress for me (for different reasons) and so I put them on the list for context. I'm not considering either so my sweet spot is somewhere north of #5 and south of #1.
Self-management is definitely not for me either!
@Aaron Hunt , seems like participating in a syndication or crowdfunding platform might be a good place to start based on your situation. Very hands-off but will still require you to do your due diligence and can generate higher returns for getting started.
Notes are interesting too. What have you found out about this segment?
If family will take priority your list should only include 1 and 2. Family will interfere with all the rest and your investment will suffer.
@Aaron Hunt I cover several of the more passive ways to do OOS REI in my BP blog article:
I have also been involved in OOS flipping and I certainly agree that has been the most stressful by far.
I've got a 30,000 ft view of notes right now but I like what I see so far. This strategy would allow me to:
a) work from wherever I want
b) create good velocity of money and get better capitalized
c) provide legitimate help to people who are struggling to keep their home
Really appreciate your questions. It's helped me to think very concretely about this.
The OP was made with the thinking that notes were where I wanted to go.
I'll keep my ears open for other strategies that are compatible with my lifestyle goals, but I think it's time for a deep dive into notes.
Thanks for a very confirming comment!
I actually read that article a few weeks ago, and I had a great conversation last week with a multi-family syndicator. They've got a solid model and good historical returns but, given my starting capital, it would be too slow of a boat. Once I'm better capitalized I could definitely see syndications as a way to diversify a bit.