Real Estate Investing – A Strategic Approach
Folks often ask me for advice on how to maximize their Real Estate (RE) investments or alternative ways to enter a competitive Real Estate market.
There is not a one size fits all answer to this question, especially when you have limited investment capital. However, I will say that the most common or best way to build your wealth and Real Estate Investment portfolio is much like any other investment strategy.
- Do your Research (to better understand your market)
- Buy Low
- Sell High
Seems straight forward, right? While that is the most common way, it’s not the only option when investing in real estate. Not everyone has the ability to enter into the RE market this way. It’s often not the fastest way to get a return on your investment, either. Following this tried and true method is contingent upon the specific climate of your local market. Real Estate markets are hyper-local. Just because one area is seeing a high return on their investments does not mean that a neighborhood two streets over will see the same result.
If you have a healthy start-up fund but limited time and want the quick and dirty route, flipping properties can still be a quick way to see your ROI.
However, if you have more time than capital, or perhaps the DIY movement was lost on you, there is another way.
Before we jump into strategy, let’s look at what constitutes a good real estate investment. Below is a list of top-level things that experienced investors consider when they look for properties to invest in — and yes, #7 is real.
- Economic Stability (local government/business community investment vs. spending)
- Growth Potential (directly tied to #1 and #5)
- Good Schools
- Commute Time (Close to a Business Park, Hospital or University)
- Community (short-and long-term plans)
- Aesthetics (Grass so perfect it looks like carpet vs. junk cars on the front lawn)
- Amenities (Is there a community center or pool, how close is Target and is there a plan to build a Wegmans?)
Finding all or even 5 out of these top 7 things in one area can be costly and your search net will shrink faster than a silk blouse in cold water. But if you can find at least 3 of the core items, your investment property choices will expand. The potential for a higher ROI lies within your ability to invest your time or your money.
I apply the same principal to Real Estate investing as I do with my time and money. Before I spend either I ask myself this question:
What is the highest and best use of my time in one or all of these areas?
How will it make an impact on the community or my real estate investment? The answer will vary depending on your geographical area and personal interests.
When I began my ROI mapping journey, I started with the top level, highest impact area of interest (for my specific investment), Community. I asked myself these Golden Questions: “What is the highest and best use of my time? What will have the largest impact on my investment now and 1-3 years from now?”
While I do have the advantage of living and working in one of the most sought-after areas in North Carolina, a lot of the areas within my real estate investment budget lacked luster, effective leadership and proper community planning. I did see a return but it wasn’t anywhere near what it had the potential to be.
On the surface, the issues and solutions seemed straightforward and manageable. Sometimes you jump in feet first to what you thought was a puddle, only to find yourself knee deep in murky water. I’m only going to stick my toe into (running with my puddle metaphor) these topics to highlight the main point.
- Local Government
These are fairly broad areas and contain many levels within [sigh]. I’m pretty confident that you understood that was not a sigh of relief. Many, if not all of these areas have a negative and frightful reputation.
One thing is certain — each of these areas can be daunting. They can also drastically affect both your bottom line as well as your quality of life in one direction or another.
Start by prioritizing them in order of manageability and ease of entry. Time and effort (both positive and negative) can have a significant impact on your life and your RE investment.
Let’s be real here. We all prefer the path of least resistance. But remember, this is a strategy for those who have more time and patience than capital.
With every decision, take a moment to ask yourself the “Golden Questions” and reflect on the Top 7 list above before you commit your time, money and effort.
Pay attention to the details. Refer back to your goals and trust your instincts. If you encounter a red flag or two, proceed with caution and change gears as appropriate.
The effectiveness of this strategy is highly dependent upon your level of efficiency and wiliness to collaborate with others toward a common, unified goal: Have a positive impact and move the arrow on your real estate investment profit growth chart up and to the right. Anything short of that goal should be evaluated immediately so you can redirect your time and investment.
We would love the opportunity to answer any questions you may have about real estate. Our team of agents and staff are committed to being the best in the industry. I’m confident that we’ll be able to meet your goals better and faster than any other agent in the area. Give us a call now, or send us an email with your questions.
All the best, Colette
This content of this article is based on specific scenarios and not a proven strategy for every market or individual investment. Before you implement any of this advice, our local agents recommend that you perform research specific to your local area/market, consult a financial advisor, attorney or an accountant in your area.