Search

THE FUNDAMENTALS: DO YOU KNOW YOUR INVESTOR TYPE? (PART 2)

There are many ways in which to get started investing in real estate. Everything from crowdfunding sites to residential real estate fix and flips to commercial storage units and office buildings are at your fingertips if you know where to look.


This is also why, as a beginner in the whole wide world of real estate investing, you might feel overwhelmed. However, with a little guidance, you'll be able to narrow down which types of investments suit your lifestyle, financial goals, and personality best.

In our last article, "The Fundamentals: How to Get Started As A New Investor, (Part 1)" we walked together through gaining a macro-view of your current life situation, determining your Why, deciding how hands-on you desire to be, assessing your risk tolerance, and even learning how much money you're ready to invest.

Ultimately, it's likely that, after slogging through those six soul-searching steps, you fall into one of these groups:

· The Lots of Money / Little Time / Hands-off Investor

· The Little Money / Little Time / Hands-off Investor

· The Little Money / Plenty of Time / Hands-on Investor

· The Lots of Money / Plenty of Time / Hands-on Investor

Ready to learn which investments fit each type of investor? Let's go!

The Lots of Money / Little Time / Hands-off Investor

Suppose you're someone who fits nicely into this category. In that case, you've likely been saving or investing in the stock market since the day you received your first paycheck. It's also possible that the tax breaks, passive income, and potential positive impact your real estate investments can make on a community attract your attention.

However, you're a very busy individual - maybe with a family or in the prime of your career or both! You haven't the time to research neighborhoods and markets or tour properties, much less to actively renovate or manage a property.

Recommendation: Become a Passive Investor

For investors with cash but no time on their hands, passive real estate investments are the ticket. You can invest passively through turnkey rental properties or commercial real estate syndications.

Turnkey Rental Properties

Turnkey rental properties are smaller scale and as simple as they sound. You purchase a to-be rental property, ready to go, with minimal involvement or work needed.

Commercial Real Estate Syndications

Another opportunity lies in group investments where money is pooled together to buy a large commercial real estate property - a syndication.

Syndicators do all the research for you, from analyzing markets to meeting brokers, hiring contractors, and much more. They find commercial real estate they think would be a homerun investment and then orchestrate the deal, the renovations, operations of the property, and a few years down the road, the sale.

This is where investors like you come in. You rely on the syndicators' time, expertise, and team. Meanwhile, you invest your money, and periodically you receive a distribution check, your portion of the returns earned on the asset. Plus, when the property sells after the hold period, you receive a part of the sale's profits.

Overview of These Types of Real Estate Investments

What you put in

Your money

What you leverage

Other people's time and expertise

What you get

Ongoing passive income, confidence knowing your money is being put to good use by an experienced team.

The Little Money / Little Time / Hands-off Investor

In contrast, if you don't have much money or time to spend investing in real estate (yet!), but real estate attracts you as a way to build such wealth, there are options for you too!

One of the best ways to get started investing in real estate with little capital is crowdfunding sites.

Recommendation: Invest through a real estate crowdfunding site

Just as Kickstarter funds new products, there are real estate crowdfunding sites. People can pitch in low amounts of capital toward commercial real estate projects. The difference? The crowdfunded commercial real estate pays cash dividends instead of t-shirts and sneak peeks of the product's prototype.

Real estate crowdfunding sites are open to public use. Typically they have low initial investment requirements and are available to both accredited and non-accredited investors.

Overview of These Types of Real Estate Investments

What you put in

Your money (in small amounts)

What you leverage

Crowdfunding platforms, experienced deal sponsors, strength in numbers (i.e., lots of people all putting in small amounts of money)

What you get

Tons of choices on crowdfunding platforms and real estate projects, ability to invest with very little capital, various project types and project lengths to suit your investment goals

The Little Money / Lots of Time / Hands-on Investor

So, you're interested in real estate, but cash isn't exactly "flowing" in your life right now. That's okay because if you're willing to roll up your sleeves, there are still ways you can make your first investment in real estate.

You still have something of value to bring to the table, sweat equity. Your effort means you're willing to spend the time and energy to find properties. You'll devour the paperwork, rehab the property (maybe personally), and make your passion for real estate create cash.

Your Strengths, Interests, and Goals

If the above describes you, take a moment to identify your strengths and passions. Does the thrill of the hunt for deals interest you the most? Are the renovation planning and execution process exciting to you? Maybe you're a numbers nerd and can't wait to analyze the trends and markets of each neighborhood?

Additionally, what are you in it for -long term equity or short-term capital?

Here are some of the most common ways to invest in real estate with little money and lots of time.

Recommended Real Estate Investment Strategies

1. Fix and Flips

This is where you buy a run-down piece of property, fix it up, and then sell it for a profit - just like it sounds! If you don't have cash for a down payment, short-term private loans might be an option. You only need a few months to a year or complete the renovations. Then when the property sells, you pay off your loans and pocket the profits.

2. The BRRRR Strategy

I hate to break it to you, but no, BRRRR doesn't mean it's cold in here. BRRRR stands for buy, renovate, rent, refinance, and repeat. It's a lot like the fix and flip strategy except that you hold onto the asset long term.

If you took out a private loan to cover the down payment, you pay off that loan during the refinance step of the process. If done correctly, the property's value after renovations/repairs will be significantly higher than the purchase price. This abrupt upward appreciation will allow you to do a cash-out refinance and pay off any loans you took to buy the property.

3. Wholesaling

If you're a good networker and happen to know of off-market deals, you may get a property under contract at a low price. Then, while you have the property under contract and before the purchase is complete, you wholesale it to another buyer at a higher price. The difference between the two purchase prices goes in your pocket.

4. House Hacking

Depending on your local market, you may get your foot in the proverbial real estate door via house hacking. You buy a property with 2-4 units, you live in one of them, and you rent out the other units. The rental income received from other tenants pays your mortgage. Sweet!

5. Real Estate Crowdfunding Sites

Crowdfunding sites are a great place to start learning about real estate syndications without the pressure of running one (yet!). You can learn to find and compare deals, research sponsor teams' track records, and discover what to expect in a syndication deal regarding communication and returns for investors.

Overview of These Types of Real Estate Investments

What you put in

Your time

What you leverage

Other people's money

What you get

Firsthand experience and the potential for high returns on very little cash investment

The Lots of Money / Lots of Time / Hands-on Investor

Um, can we be best friends?

You're in a fantastic position to make your money grow exponentially.

Recommendation: Lead commercial real estate syndications

If you'd like to be an active investor, leading syndications puts you in the driver's seat. You get to find the deals, assemble the team, raise the capital, and have a say in the day-to-day operations. The choice is yours to go it alone as the syndication lead or partner with others and create a syndication business.

Recommendation: Become a passive investor in commercial real estate syndications

You also have the option to be a passive investor who's extremely active in finding and vetting deals for real estate syndicators or private equity firms.

Savvy passive investors know the lingo and have some basics down about deal structures and underwriting. Any investment can look great in a fancy marketing packet. Still, only savvy investors will know the right questions to ask and be able to reveal details about the deal and the team.

Overview of These Types of Real Estate Investments

What you put in

Your money and your time

What you leverage

The power of others' expertise, time, and money to help you go bigger, faster

What you get

The freedom to carve your path and maximize how hard your money is working for you

Summary

This article just threw a ton of information at you. Even though it was separated into categories, an overview might do you some good.

Before reading this, we hope you took some time to identify your investing goals, current life stage, risk tolerance, and investing goals. If not, explore these nuggets in "The Fundamentals: How to Get Started As A New Investor, (Part 1)"

From there, you likely fell into one of four categories. Within each group, beginner investors have multiple opportunities to get started on their real estate investment journey. Our suggestions for real estate investment opportunities per investor-type are as follows:

The Lots of Money / Little Time / Hands-off Investor

Consider investing passively in commercial real estate syndications

The Little Money / Little Time / Hands-off Investor

Consider investing small amounts through real estate crowdfunding sites

The Little Money / Lots of Time / Hands-on Investor

Lots of options: Fix and flip, BRRRR method, wholesaling, house hacking, crowdfunding, and more

The Lots of Money / Lots of Time / Hands-on Investor

Active: Consider leading a commercial real estate syndication

Passive: Invest through real estate crowdfunding sites or directly through syndicators and private equity firms

Conclusion

There are real estate investment opportunities for every type of investor, at every stage of life, with any range of available capital and time freedom. Once you're able to identify which investor type you are at this time in your life, you can see the opportunities within that category and how they make sense for you.

One common misconception is that you need a decent amount of capital saved up to get started investing in real estate. The options presented above, coupled with The Little Money investor type, debunked that myth!

Now, I encourage you, don't wait a minute longer. Get started toward becoming a real estate investor by taking action on one of the passive or active investment opportunities described above, according to the category you best fit.

We look forward to chatting with you soon about our syndication opportunities.

Would you like to know more? Join the Ellis Chris Investor Club, a community of investors, just like you, who are investing in real estate syndications (group investments), so they can build passive income and grow their wealth with confidence and ease.

Mandarin Orange Food Journal Book Cover

Join Our Club

The Ellis Chris Investor Club is a community of investors, just like you, who are investing in real estate syndications (group investments) so they can build passive income and grow their wealth with confidence and ease.

pexels-emre-kuzu-2893961.jpg

What's Your Real Estate Investing Superpower?

So you're interested in real estate investing, take this quiz and get to know your personal real estate investing type +

Download your FREE customized  real estate investing guide.

Add a subheading (6).png

Be An Insider

As an Insider you'll be the first to hear all the buzz.  Access our exclusive resources to learn more about passive income and multifamily syndications.

© 2021 All Rights Reserved By Ellis Chris Properties LLC 

  • LinkedIn
Real_Estate_Accelerator_Certified (1).pn