Which strategy to invest in?

8 Replies

Hi Everyone - the beauty of real estate is that there are so many different ways to be involved. But lately I feel like I'm getting lost in developing a strategy.

I work full-time, but have always looked for areas to invest in. Several years ago I purchased a foreclosed home, rehabbed, then sold via seller finance. I ended up selling that note last year.

Last year I started investing in non performing 2nd mortgages. It's been slow, but some worked out really well, some were a bust, and others were nominal.

We moved out of our house this year and put that up for rent.

This year I was working with a partner to get into a business (car wash or self storage). Focused on this for several months but eventually got distracted with development.

Met a developer and most recently wanted to either build a strip center, lease out then sell. Or build townhomes or demo/rebuild luxury spec homes in highly sought after areas in town.

Also been interested in multi family, Grant Cardine style, buy well add value, hold/sell.

At this point have a decent amount of coin and potential partner but have confused myself on a strategy and what to pursue.

One day I like the idea of cash flowing, sometimes I like exit strategies that development projects have. I'm really having trouble focusing on a strategy at this point.

How do you guys hone in on your strategy and weigh the pro's and con's of different ways to invest out there?

Thanks,
Shak

Shak--it sounds like you've had a lot of great, diverse investment experiences. It's neat to see that you are almost overwhelmed by opportunity!  That's a good problem to have, and it's what happens when you maintain an abundance mentality (which you clearly have!).  

The first thing I thought of when I read your post is a good real estate book called "Equity Happens" by Robert Helms and Russell Gray ('the real estate guys,' who have an excellent podcast too).  There's a big focus in that book on finding "your personal investing philosophy" and as I recall there are some key questions they recommend you ask yourself. This could be a good book to read and go through these exercises; it could really help you shed some light on which angle of real estate is best suited for you and your goals.

Shak, Good for you having options! Seems to me the bigger question is two parts. First, what type of investing is most interesting to you, and second what do you need to accomplish. For me, I was looking for cash flow to replace income from a W-2 job. That led me towards car washes which have a pretty strong cash flow, but require me to invest time in the business. For you the cash flow may not be as important, so you could shift towards investments that are more passive day-to-day. There may also be an area that is just really interesting to you. 

Go get 'em!

Hey @Shahrukh Noormohammed! It sounds like you've had a lot of success with several different strategies, based on all that you've done why not work with a few strategies?

Having several strategies would allow you to do more deals. 

For example, I use the BRRR strategy, the value add multi-family long term hold strategy, the build to rent strategy and a little known strategy called supported living (renting properties to residents with disabilities which the state pays for and provides care and rents are guaranteed and paid for).

Each strategy has it's different quirks:

  • Build to rent takes forever and is the hardest to find but offers the most equity and allows me to recoup all of my capital upon refinance to permanent financing and get a brand new building at the end of the day.
  • BRRR offers the highest returns but takes a lot of work.
  • Value add multi family is sold, easy to find in most markets and offers high cash flow and equity
  • Supported living is solid with rents & utilities paid by the government and offers a zero vacancy rate but its harder to raise rents and the caregivers can be 

When a new opportunity comes up I see if any of my strategies will work and if not I pass. 

Originally posted by @J Warrens:

Shak--it sounds like you've had a lot of great, diverse investment experiences. It's neat to see that you are almost overwhelmed by opportunity!  That's a good problem to have, and it's what happens when you maintain an abundance mentality (which you clearly have!).  

The first thing I thought of when I read your post is a good real estate book called "Equity Happens" by Robert Helms and Russell Gray ('the real estate guys,' who have an excellent podcast too).  There's a big focus in that book on finding "your personal investing philosophy" and as I recall there are some key questions they recommend you ask yourself. This could be a good book to read and go through these exercises; it could really help you shed some light on which angle of real estate is best suited for you and your goals.

 I appreciate the book and podcast references, those do sound like they'll be useful for me.  I'll check them out!

Originally posted by @Dave Carpenter :

Shak, Good for you having options! Seems to me the bigger question is two parts. First, what type of investing is most interesting to you, and second what do you need to accomplish. For me, I was looking for cash flow to replace income from a W-2 job. That led me towards car washes which have a pretty strong cash flow, but require me to invest time in the business. For you the cash flow may not be as important, so you could shift towards investments that are more passive day-to-day. There may also be an area that is just really interesting to you. 

Go get 'em!

 Thanks for chiming in @Dave Carpenter.  I feel like I went from passive day-to-day to more cash flow focused.  I'm not too excited about the notes business and I think that's what drew me into looking at businesses like car wash and self-storage.  Then I felt like development was the best of both worlds (more active with potential for acceleration in capital).  

I feel like maybe I'm trying to figure out if I should focus on development (which I really don't have much experience in) or 20+ multifamily with value add and exit in 5-10 years?

Originally posted by @Jennifer Beadles :

Hey @Shahrukh Noormohammed! It sounds like you've had a lot of success with several different strategies, based on all that you've done why not work with a few strategies?

Having several strategies would allow you to do more deals. 

For example, I use the BRRR strategy, the value add multi-family long term hold strategy, the build to rent strategy and a little known strategy called supported living (renting properties to residents with disabilities which the state pays for and provides care and rents are guaranteed and paid for).

Each strategy has it's different quirks:

  • Build to rent takes forever and is the hardest to find but offers the most equity and allows me to recoup all of my capital upon refinance to permanent financing and get a brand new building at the end of the day.
  • BRRR offers the highest returns but takes a lot of work.
  • Value add multi family is sold, easy to find in most markets and offers high cash flow and equity
  • Supported living is solid with rents & utilities paid by the government and offers a zero vacancy rate but its harder to raise rents and the caregivers can be 

When a new opportunity comes up I see if any of my strategies will work and if not I pass. 

 Hi Jennifer, thanks for adding your experiences, great perspective.  Couple of questions for you:

When doing build to rent, do you ever sell them after renting them out for a year or so, or are you holding them long term?

Also, what is the difference between BRRR and value add multi family?

And how do you decide which to pursue or which one do you prefer?  

When you say you see if any of your strategies will work when a new opportunity comes up, do you not search out specific opportunities depending on which strategy you are looking to implement?

Thanks!

Originally posted by @Shahrukh Noormohammed:
Originally posted by @Jennifer Beadles:

Hey @Shahrukh Noormohammed! It sounds like you've had a lot of success with several different strategies, based on all that you've done why not work with a few strategies?

Having several strategies would allow you to do more deals. 

For example, I use the BRRR strategy, the value add multi-family long term hold strategy, the build to rent strategy and a little known strategy called supported living (renting properties to residents with disabilities which the state pays for and provides care and rents are guaranteed and paid for).

Each strategy has it's different quirks:

  • Build to rent takes forever and is the hardest to find but offers the most equity and allows me to recoup all of my capital upon refinance to permanent financing and get a brand new building at the end of the day.
  • BRRR offers the highest returns but takes a lot of work.
  • Value add multi family is sold, easy to find in most markets and offers high cash flow and equity
  • Supported living is solid with rents & utilities paid by the government and offers a zero vacancy rate but its harder to raise rents and the caregivers can be 

When a new opportunity comes up I see if any of my strategies will work and if not I pass. 

 Hi Jennifer, thanks for adding your experiences, great perspective.  Couple of questions for you:

When doing build to rent, do you ever sell them after renting them out for a year or so, or are you holding them long term?

Also, what is the difference between BRRR and value add multi family?

And how do you decide which to pursue or which one do you prefer?  

When you say you see if any of your strategies will work when a new opportunity comes up, do you not search out specific opportunities depending on which strategy you are looking to implement?

Thanks!

Looks to me as if ALL of Jennifer's strategies are a variation of the BRRRR strategy (ie. ALL her buys/developments get Refinanced asap to get her deposit back, and NONE of them look to be bought specifically for the purpose of flipping).

And, why limit opportunities to a predetermined single strategy, if MANY strategies are already in your arsenal? My 2c...

@Shahrukh Noormohammed

I use to build spec homes and sell them, now it's build to rent for a long term hold. No plans to sell in the short term.

The difference between the BRRR and value add multi family is I'm not always able to get my initial investment back with value add right away. Those I purchase with 25% down conventional loans though I almost always get a line of credit to be able to use some of the equity.

I have excel calculators that I use to run the numbers. I prefer a BRRR but they are harder to find right now.

Build to rent is very specific so I do search those out, though I won't pass up a value add or BRRR while I'm searching.