Choosing the Correct Investment Strategy

There are so many ways to tackle this particular question. Ask ten investors, all ten may tell you something different. The issue with taking advice on what type of property to buy or whether Short Term Rentals or Long Term are a better investment from someone else, is it may not be the best advice for YOU!

My biggest concern when addressing this question is not to overcomplicate things. After sitting, staring at this page for what seems to have been hours, this is what I have come to find to be the best for this week's Real Estate Blog - Choosing the Correct Investment Strategy!

                                The Five W’s - Who, What, When, Where and Why

The Five W’s have stuck with me from grade school for some odd reason. Maybe, just maybe, it was all building to this moment to help other investors choose the absolute right investment strategy for them. Is this a bold claim, yes! Will this work for you, I genuinely hope so. At the very least, my goal for you is to help you narrow your thinking in the wide world of Real Estate and pick the right investment path for YOU and you alone.

Let’s work backwards through the Five W’s to help us choose an investment for the first time or ensure as a seasoned investor our portfolio matches our values and long term vision.

The Five W’s - Why

I have never met Simon Sinek but I hope he would be proud that WHY is leading the charge. In Sinek’s book “Start With Why: How Great Leaders Inspire Everyone to Take Action” he emphasises that organizations and people should start with why helps activate our limbic system within our brain.

The limbic system helps us manage emotions, memory, and behavior, guiding how we respond to experiences and act in the future. Having a strong Why can not only get us going but keep us going when times are tough.

Just as passionately Sinek talks about starting with why at an organizational level, I genuinely believe we need to be able to clearly articulate our why long before we make our first purchase.

***Seasoned investor, this is a great opportunity to have some fun. Envision for a moment you are back to day one but in today's world. You have all the knowledge you have earned over your years of experience but that is it! Properties are gone… just for a few minutes at least***

If your response was, “too get rich”, you’re off to a good start but lets define start to define rich.

Do you want to own a property overlooking the ocean with a 60 foot yacht outside? Sweet!

Do you want to Real Estate to simply cover your own Mortgage? Perfect.

Is your Real Estate designed to fund TODAY's lifestyle or Tomorrow's lifestyle (retirement)? 

What does that lifestyle look like? I would encourage you to dive deep here.

Personal Reflection - My WHY has changed over the last seven years and I bet yours will too over time. I will make a habit of ending each section with a personal reflection but do not want you to feel like my answers should be your answers. If you need to copy them to get going, remember it is okay to pivot and make changes in time.

My WHY in 2017 when we first began in Real Estate - To use Real Estate Leverage as a Tool to Accelerate Wealth Building.

My WHY in 2020 - Use Real Estate to Cover All Fixed Bills - Mortgage, Insurance, Utilities, Etc.

My WHY Today - Use Real Estate to Support a Balanced Lifestyle between

Wealth, Health and Family.

The Five W’s - Where

This is likely one of the more controversial topics of the five as it relates to Real Estate Investing. You will hear the guru’s shout from the rooftops, “Buy in the City, Buy in a Tourist destination, Buy in an Emerging Market, Buy a Trailer Park in a Rural Area, Buy here! Buy there!!!

I am a firm believer that you can make money in all of those markets. I am also a firm believer you can lose dearly in each of those markets as well.

“Buying Right” should always be our goal in any market and for any style of investment.

Simply put, when a Real Estate Investment is made correctly, profit should be guaranteed on the front end and realized on the back end.

Real Life Example - My best friend just bought a house in his home town of Bethel, ME for $370,000 in December of 2024. Because he knew his market so well, he was able to make a handshake deal with the owner on the golf course. Although his purchase was not contingent on an appraisal, he had done one during the due diligence phase only to find that as soon as he closed, a bank would recognize the property as valued at $535,000. A $165,000 equity profit day one!

Again, profits should be guaranteed on the front end and realized on the back end.

Back to WHERE to buy real estate now that we know that the deal itself may be more important than the location you buy in. If you are not comfortable with your market or do not want to do the legwork yourself, you can start to build a team.
A team consisting of a Realtor, a Lender and an Attorney would be a great place to start. If you are willing to do the work yourself, consider diving into the following strategies to see if any appeal to you -

Networking Groups

Real Estate Meetups

MLS - Current and Past Listing

Door Knocking

Direct Mailers

Cold Calling

Building a team and utilizing the strategies above can be lucrative in your immediate area and from a long distance. It may come down to how involved and in control you want to be. We will dive into this a bit more in the final section - Who.

Personal Reflection - My wife and I have been lucky enough to test out multiple approaches. We bought our first property next to a friend that knew their neighbor was interested in selling. We bought our first multi family after it sat on the MLS for 9 months. We bought our first flip from networking and we bought our two most recent buildings from a cold email/cold call combo.

The Five W’s - When

Let us start with a quote by Benjamin Graham that will likely sum up this entire section -

“The Best Time to Invest is When You Have Money. That is Because History Suggests it is NOT Timing Which Matters, but Time”

Do you know someone that has been talking about buying a home or investment property for the last 5+ years and have yet to commit. I can think of a half dozen people right now that have been talking about buying Real Estate since me and my wife started back in 2018 and still haven’t made a single offer on a property. They fill the air with bull shit excuses like -

We are waiting for rates to come down just a bit more…

We are waiting for the bidding wars to end…

Everything we can afford needs too much work…

Prices are just too high…

If you’re one of those people, I hope and pray that this Real Estate Blog will get you over the finish line and help you buy your first investment property.

Personal Reflection - We are currently blessed to own $1,750,000 in Real Estate as of the end of 2024. If it takes someone another two years to buy their first property, we will have made another $100,000+ in Equity at a reasonable 4% growth rate without having to do anything more. I don’t say that to boast, I say it because it saddens me that others will miss out on the same kind of opportunity.

If the profit can be guaranteed on the front end and you have money to deploy, please get going! It won't be all sunshine and roses but with enough determination, you will figure it out as you go.

The Five W’s - What

This section we are going to have to tackle in chunks as this can and likely will be an entire blog post by itself. What kind of Real Estate is right for you!? Only you can answer that but let's dive into the different routes you could go and a few of their pros and cons. Let's start with the big two players today and touch on a number more at the bottom of this section.

Residential vs Commercial

Both Residential and Commercial Real Estate, if bought and managed correctly, can be wonderful investments. There are some fairly significant differences we should address here.

*** Reminder - Take time to think about your own situation and how these strategies may fit into your future portfolios ***

Residential has historically had higher growth rates while commercial has had higher yearly cash on cash returns. Are you saving for retirement in 30 years or are you trying to replace your W2 income as fast as possible?

Residential has historically a more traditional purchase making it easier to finance, rent, manage and sell when the time comes. Conversely, Commercial has become easier to finance over the years, towns are becoming more flexible on uses and the market is fairly liquid but is much more dependent on the overall economy.

Commercial deals can be financed/appraised using the Income Approach whereas Residential typically leans towards the Comparison Approach. This means as a commercial landlord, your ability to increase the building value is directly tied to your ability to increase rent and lower expenses.

We started with these two categories because I believe in one way or another, one could argue the following categories are just subsets of Residential and Commercial Investing.

• Single Family Homes
• Multifamily Investments
• Condo/Townhome Investments
• Short Term Rentals
• House Flipping
• Mobile Park Investments
• Office Space
• Industrial
• Storage
• Raw Land
• Mixed Use
• RV Park
• REIT’s
• Retail

I am sure there are a dozen more that may jump out to you but these are just the most popular I have seen in my time as an investor.

Personal Reflection - Our first purchase was a townhome in need of a lot of work. Although it was not a lot of money to some, it still seemed expensive to us! We risked everything it seemed to muster up $15,000 to close on the place with an FHA loan. Every bonus or little savings we put together went straight to projects on the place. After two years of saying no to trips and cutting back on lifestyle, we were able to sell the place for $100,000 profit. Today, we are looking for 5+ Units and won't do a deal unless there is a path to making $100,000 in 12 months or less.

Our WHAT has changed with almost every purchase. For us, it's about finding what we believe is the best deal possible. We went from a townhouse, to a duplex, to a flip, to a Mixed Use Building and now another two Mixed Use Buildings.

It is okay to change your goals, vision and what you buy over time. The biggest challenge I see most people face is making that initial decision for fear of making the wrong one.

The Five W’s - Who

This may be one of the easier questions to answer. I would say it is as simple as -

1. Do you prefer to be in control of your projects and enjoy hands-on work?
2. Do you prefer to delegate and can find comfort in the unknown?

Okay, it may be a bit more complicated than that but in reality, it may not have to be.

As we have seen, you can successfully invest in many different strategies across a wide geographical area. Now the only question left to ask is how much are YOU willing to do?

Below we will explore some of the routine tasks that one can expect when investing in Real Estate. Now is the time to have an honest conversation with yourself on your strengths and weaknesses and decide what you are willing to do and what must be delegated to be successful in the long run.

Typical Landlord Annual Task - Annual Filings, Town and State Compliance, Insurance Premiums, Property Tax Bills, Fire and Security Test, State and Federal Tax Requirements.

Monthly Task - Bookkeeping, Rental Collection, Bill Pay, Tenant Turnover

Weekly Task - Tenant Issues, Building Maintenance, Property Maintenance.

Personal Reflection - I am a control freak, not being able to drive by my properties at any given time would make me lose sleep. Knowing this about myself, I would not invest outside of a 60 minute radius of my current portfolio unless I was going to build a 100% self-sufficient team around the investment property itself.

It is time to decide if YOU are up for the challenge, WHAT kind of investment would suit your goals and needs, WHEN will you get started, WHERE will you invest your hard earned money, and most importantly, WHY are you investing in Real Estate.

If you take nothing else away from this letter, figure out what kind of real estate investment appeals to you the most and tell everyone! You will be shocked by what lands in your lap when you put your goals and aspirations out into the world for everyone to hear.