Hello, I would love to hear from you guys about your personal experience selecting a niche? How did you go about it? Was it pretty deliberate and strategic or more of a reaction to the opportunity in front of you? Any learnings and guidance you could share would be appreciated. Thanks!
Hey @Matt F.! I think for me it was all about my goals and the resources I had when starting out. I had very little cash and bad credit. My options were limited. I found out that you could actually wholesale with no cash and bad credit, so thats where I started.
I think as you grow and learn you evolve! Once I started making big checks, I paid off debts and worked on my credit. I then transitioned over to buy and hold SFR rentals because I wanted to build passive cash flow!
Now after acquiring several SFRs I want to scale and think multifamily is the way to go! I am currently working on syndicating my first multifamily deal!
I think you have to start somewhere and don't feel locked in! What are your goals? Do you want passive income? Do you want cash? What resources do you currently have? Do you have cash? Do you have time? Do you have access to cash through a network of relationships? Answering these questions will help you determine what strategy is best for you to start with. Keep in mind it is always subject to change! Key word there is subject to change not quit!
Hope that helps!
Hey @Matt F.! I think for me it was all about my goals and the resources I had when starting out. I had very little cash and bad credit. My options were limited. I found out that you could actually wholesale with no cash and bad credit, so thats where I started.
I think as you grow and learn you evolve! Once I started making big checks, I paid off debts and worked on my credit. I then transitioned over to buy and hold SFR rentals because I wanted to build passive cash flow!
Now after acquiring several SFRs I want to scale and think multifamily is the way to go! I am currently working on syndicating my first multifamily deal!
I think you have to start somewhere and don't feel locked in! What are your goals? Do you want passive income? Do you want cash? What resources do you currently have? Do you have cash? Do you have time? Do you have access to cash through a network of relationships? Answering these questions will help you determine what strategy is best for you to start with. Keep in mind it is always subject to change! Key word there is subject to change not quit!
Hope that helps!
Well said @Stephen Akindona!
For me, it kind of fell into place. I bought a SFH as a rental because it made the most sense to me as a first investment. MFH were overpriced and it didn't work within my risk tolerance at the time.
However, I do not believe you have to stay within a niche. It makes systems and processes easier but you can branch out and diversify where you see more opportunity. I believe the more new avenues you travel you invite more unknown risk. There are ways to combat this by partnering, networking, etc. Consider looking at your personality and seeing what gets you most excited.
With that being said, I have not left my niche of SFHs yet.
Hey @Matt F.! I think for me it was all about my goals and the resources I had when starting out. I had very little cash and bad credit. My options were limited. I found out that you could actually wholesale with no cash and bad credit, so thats where I started.
I think as you grow and learn you evolve! Once I started making big checks, I paid off debts and worked on my credit. I then transitioned over to buy and hold SFR rentals because I wanted to build passive cash flow!
Now after acquiring several SFRs I want to scale and think multifamily is the way to go! I am currently working on syndicating my first multifamily deal!
I think you have to start somewhere and don't feel locked in! What are your goals? Do you want passive income? Do you want cash? What resources do you currently have? Do you have cash? Do you have time? Do you have access to cash through a network of relationships? Answering these questions will help you determine what strategy is best for you to start with. Keep in mind it is always subject to change! Key word there is subject to change not quit!
Hope that helps!
Thank you Stephen, this is helpful!
What are your goals?
My primary goal is to achieve financial freedom within 5 years, which to me means having my current income completely replaced by rental property income.
Do you want passive income?
Yes, as I'm thinking about this now, that's my primary objective.
What resources do you currently have?
I have a variety of friends who have some level of experience in real estate that I can learn from. I also have a good friend that is moving forward and it's likely we can work together to some extent (details tbd).
Do you have cash? Do you have time? Do you have access to cash through a network of relationships?
I have some, not tons, but enough to get the ball rolling. I don't have a lot of time. Basically nights and weekends. I would go all-in though if expenses can be met. Access -- maybe. I know a lot of people who may be interested once I've developed expertise and can demonstrate results.
@Matt F. I am in the same boat. I believe I have my niche sorted out at this point. It is obvious you need knowledge about your niche, but I think it is also very important to consider the struggle. Everyone wants to be a millionaire with G6, (insert wildest dreams here), etc, but most people are not willing to suffer to get to this point. Know what level of suffering you are willing to go to. In Mark Manson's book The Subtle Art of Not Giving a F**k he describe wanting to be a rockstar, but not wanting to practice for hours and hours, also not wanting to play at gigs no one goes to, or setting up and breaking down the equipment. I think for me when I think about how I am going to invest, I think about the level of suffering I am willing to endure. Am I willing to manage the property? Do I want to run the rehab? So many people have great success in business, but they sacrifice health, and family in the process because they never considered the cost. Another great book to read before you get started is Lifeonnare. Hope this helps. Let us know what you decide to do.
@Matt F., based on your answers I would say that you need to focus on the buy and hold strategy! This builds cash flow and you can either go single family or Multifamily! In my opinion you need to quantify your goals! If you want to replace your earned income with passive income apply this formula. Let’s assume you can earn $100 of spendable cash flow per door, how many doors would you need to achieve your goals?
Likely you would need a lot of doors! So with your aggressive time line I would say Multifamily is your niche because it gives you the greatest chance of success.
I have come to this conclusion myself personally. I have passive income goals that are likely not achievable in my desired time frame using the single family asset class!
@Matt F. I am in the same boat. I believe I have my niche sorted out at this point. It is obvious you need knowledge about your niche, but I think it is also very important to consider the struggle. Everyone wants to be a millionaire with G6, (insert wildest dreams here), etc, but most people are not willing to suffer to get to this point. Know what level of suffering you are willing to go to. In Mark Manson's book The Subtle Art of Not Giving a F**k he describe wanting to be a rockstar, but not wanting to practice for hours and hours, also not wanting to play at gigs no one goes to, or setting up and breaking down the equipment. I think for me when I think about how I am going to invest, I think about the level of suffering I am willing to endure. Am I willing to manage the property? Do I want to run the rehab? So many people have great success in business, but they sacrifice health, and family in the process because they never considered the cost. Another great book to read before you get started is Lifeonnare. Hope this helps. Let us know what you decide to do.
Thanks James, that great perspective! My situation is that the suffering of not making a move and being subject to another 20+ years of corporate life exceeds the suffering of working exceptionally hard for a shorter period of time. I hear you though. I know there will be times I'll have to remind myself of the bigger picture.
Thanks for the book recommendations. I'll check them out!
@Matt F., based on your answers I would say that you need to focus on the buy and hold strategy! This builds cash flow and you can either go single family or Multifamily! In my opinion you need to quantify your goals! If you want to replace your earned income with passive income apply this formula. Let’s assume you can earn $100 of spendable cash flow per door, how many doors would you need to achieve your goals?
Likely you would need a lot of doors! So with your aggressive time line I would say Multifamily is your niche because it gives you the greatest chance of success.
I have come to this conclusion myself personally. I have passive income goals that are likely not achievable in my desired time frame using the single family asset class!
That makes sense. I agree, I think multi-family is a must-have to achieve my goal. What I'm wondering is if it might make sense to BRRRR a certain amount of SFR first in order to build up a portfolio I can use to gain entry in multi-family? What do you think?
@Matt F. I am in the same boat. I believe I have my niche sorted out at this point. It is obvious you need knowledge about your niche, but I think it is also very important to consider the struggle. Everyone wants to be a millionaire with G6, (insert wildest dreams here), etc, but most people are not willing to suffer to get to this point. Know what level of suffering you are willing to go to. In Mark Manson's book The Subtle Art of Not Giving a F**k he describe wanting to be a rockstar, but not wanting to practice for hours and hours, also not wanting to play at gigs no one goes to, or setting up and breaking down the equipment. I think for me when I think about how I am going to invest, I think about the level of suffering I am willing to endure. Am I willing to manage the property? Do I want to run the rehab? So many people have great success in business, but they sacrifice health, and family in the process because they never considered the cost. Another great book to read before you get started is Lifeonnare. Hope this helps. Let us know what you decide to do.
Thanks James, that great perspective! My situation is that the suffering of not making a move and being subject to another 20+ years of corporate life exceeds the suffering of working exceptionally hard for a shorter period of time. I hear you though. I know there will be times I'll have to remind myself of the bigger picture.
Thanks for the book recommendations. I'll check them out!
That is a great point. I am thinking the same way. While I love my job. It stress me out to hear people say I only have 15, 20, 30 more years then I can hope social security, and the state retirement will take care of me. Seems very risky to me. I want more control even if it means more struggle upfront, but more security in the long run.
@Matt F. I am in the same boat. I believe I have my niche sorted out at this point. It is obvious you need knowledge about your niche, but I think it is also very important to consider the struggle. Everyone wants to be a millionaire with G6, (insert wildest dreams here), etc, but most people are not willing to suffer to get to this point. Know what level of suffering you are willing to go to. In Mark Manson's book The Subtle Art of Not Giving a F**k he describe wanting to be a rockstar, but not wanting to practice for hours and hours, also not wanting to play at gigs no one goes to, or setting up and breaking down the equipment. I think for me when I think about how I am going to invest, I think about the level of suffering I am willing to endure. Am I willing to manage the property? Do I want to run the rehab? So many people have great success in business, but they sacrifice health, and family in the process because they never considered the cost. Another great book to read before you get started is Lifeonnare. Hope this helps. Let us know what you decide to do.
Thanks James, that great perspective! My situation is that the suffering of not making a move and being subject to another 20+ years of corporate life exceeds the suffering of working exceptionally hard for a shorter period of time. I hear you though. I know there will be times I'll have to remind myself of the bigger picture.
Thanks for the book recommendations. I'll check them out!
That is a great point. I am thinking the same way. While I love my job. It stress me out to hear people say I only have 15, 20, 30 more years then I can hope social security, and the state retirement will take care of me. Seems very risky to me. I want more control even if it means more struggle upfront, but more security in the long run.
Totally. I am fortunate in my employer is one of the very few that still offers a pension. That said, I do not want to be living for my pension. What's interesting is that I've done the 'pension calculator' to understand what the projections are and how much an extra year of service earns me over time. Comparing this to the cash flow of a rental property really puts things in perspective. Much higher return on time and effort to focus on real estate! :-)
Honestly @Matt F., I’m glad that I have the single family houses I own, but I wish someone would have told me that investing in single families does not prepare you for investing in Multifamily. I feel very confident in buying, renovating, renting and managing single family houses! This skill while good to have has not really prepared me for Multifamily! I am currently making the transition and realizing how much I have to learn to be successful!
My recommendation would be to just jump right into Multifamily! Find someone local who can show you the ropes and just get the mission accomplished. You will need 3-5 years focusing on Multifamily to get to financial freedom anyway! Start the journey now. I think single family is better suited for people who want to supplement retirement or are looking to have tenants pay off debt over the long term! Unless of course you happened to have a lot of cash in 2009 when people were giving houses away!
Honestly @Matt F., I’m glad that I have the single family houses I own, but I wish someone would have told me that investing in single families does not prepare you for investing in Multifamily. I feel very confident in buying, renovating, renting and managing single family houses! This skill while good to have has not really prepared me for Multifamily! I am currently making the transition and realizing how much I have to learn to be successful!
My recommendation would be to just jump right into Multifamily! Find someone local who can show you the ropes and just get the mission accomplished. You will need 3-5 years focusing on Multifamily to get to financial freedom anyway! Start the journey now. I think single family is better suited for people who want to supplement retirement or are looking to have tenants pay off debt over the long term! Unless of course you happened to have a lot of cash in 2009 when people were giving houses away!
Thanks for the perspective Stephen! This is a different way of looking at it. I appreciate it!
One strategy or asset class is not better than the other. It's based on goals, opportunities, and preferences. Pick one and pivot as you go. And go full speed.
Goal = 5 years to FI. Whichever strategy you pick, be sure to add value.
My niche (turnkeys) kind of found me, but assuming a niche doesn't find you, I highly recommend being strategic about it, yet.
Every single strategy in REI requires a different level of: work, effort, skill, risk, returns, etc. There are so many ways to get involved in a strategy that doesn't at all hit your goals, and it's also easy to tank an investment if you're swimming that hard upstream.
I do think though that if you spend enough time getting educated on all the strategies and learning quite a bit that a good niche will start to find you. Or one will start to stand out above the rest as a potential option for you.
I knew I wanted to buy and hold from the get go for a few reasons: Residual income that comes in whether I work or not, low transaction costs per asset, tax advantages during the hold and at exit, leverage and legacy wealth-building.
The specific assets and methods of purchase under the b&h umbrella presented themselves uniquely dependant on seller needs and asset types available in my market.
Early on for me silents (over 65yo in 2003) were unloading their 7 to 10 plexes. I quickly became a commercial underwriter and seller financing expert. I'd sunk most of my education into conventionally purchased single-fam houses, but pivoted.
I've pretty much only been doing houses for 12 years since 2007 but see a new wave of du and quadplexes coming from aging boomers. I am learning more about the small multi space and how to best RUBS separate common water meters in preparation for this. Know your market and your seller's demographic.
As houses got boring I am also exploring repurposing industrial and retail property that has outlived its original scope and design. I am also considering nightclubs and self-storage. MHPs interest me but aren't very available to me.
The point is- along your journey different aspects of investing will present themselves or appeal to you. You don't have to marry one niche or one archetype within that niche.
Under all of this is the common denominator of being an investor for freedom from and freedom to. We leverage our capital and expertise for a return.
Along the way I have also been a lender, matchmaker, wholesaler, lease optionee/or, flipper and consultant. Fit the asset and situation to what is available to you in your toolbox. Acquire a large toolbox of resources as you go and grow but you don't need one to get started.
I picked the one that made the most sense to me. It was also one that I had the most experience in and easiest to duplicate. I always go with the easiest road and the one with the most opportunities. Master one then just rinse and repeat.
One strategy or asset class is not better than the other. It's based on goals, opportunities, and preferences. Pick one and pivot as you go. And go full speed.
Goal = 5 years to FI. Whichever strategy you pick, be sure to add value.
Hey Mike, thanks for your reply. When you say be sure to add value, are you referring to forced appreciation on the property?
There is money in every niche. Find the one that fits your personality and passion.
Thanks Ian! Good advice. I've heard it said, 'pay attention to what gets you excited.'
One strategy or asset class is not better than the other. It's based on goals, opportunities, and preferences. Pick one and pivot as you go. And go full speed.
Goal = 5 years to FI. Whichever strategy you pick, be sure to add value.
Hey Mike, thanks for your reply. When you say be sure to add value, are you referring to forced appreciation on the property?
Yes, you won't get there in 5 years without it.
One strategy or asset class is not better than the other. It's based on goals, opportunities, and preferences. Pick one and pivot as you go. And go full speed.
Goal = 5 years to FI. Whichever strategy you pick, be sure to add value.
Hey Mike, thanks for your reply. When you say be sure to add value, are you referring to forced appreciation on the property?
Yes, you won't get there in 5 years without it.
Got it, that makes total sense. Thanks!
@Matt Ferch I started from the end, asking myself "where do you want to be in 15 years?" in terms of cash flow. Then reversed engineered it to what I need to do in 5 years and in the next year. For me, buying SFHs was too slow for what I needed, so I decided to go with MF. This is what was good for me, and each investor is different. It's also an asset class that I like and understand. Hope that helps!
@Matt Ferch I started from the end, asking myself "where do you want to be in 15 years?" in terms of cash flow. Then reversed engineered it to what I need to do in 5 years and in the next year. For me, buying SFHs was too slow for what I needed, so I decided to go with MF. This is what was good for me, and each investor is different. It's also an asset class that I like and understand. Hope that helps!
Thanks Ellie! That makes sense. At this stage of my learning, I am trying to understand and construct that type of high level plan. With multi-family, what happens once I get a property cash-flowing? With the BRRRR strategy on single family residences, there's kind of a built in path forward. What's the path forward look like for building scale on multi-family?
Usually many MFHs are cash flowing from day 1, then you can renovate units and raise rents (increase NOI) and/or cut expenses. Some sell after 3-7 years and some hold in perpetuity.
Usually many MFHs are cash flowing from day 1, then you can renovate units and raise rents (increase NOI) and/or cut expenses. Some sell after 3-7 years and some hold in perpetuity.
Thanks Ellie! If you want to go faster than cash flow and investable capital allows, you raise money? Other strategies?