What's the Right Investment for You?

I am often asked at real estate meetings,

“What should I invest in?”

The answer is complex and it varies by person, but the primary elements to consider are what are you starting with, where do you want to end, and what’s your timeline?

And while those elements are important, when I consult with people, I focus my clients on what life they want to live between now and then?

Finding out what the right investment is for you is a matter of knowing your personality. What is your risk tolerance? Ask yourself, if it goes wrong, what and how much are you willing to risk? How educated and experienced are you? The more education and experience you have, the more your risk tolerance increases. Investments flop some times, in fact, it is best to plan on having an early investment flop. However, don’t assume that one flop means it’s not worth being a real estate investor, simply take that as a learning experience. Knowing your risk tolerance is crucial to deciding what investments are right for you.

Are you the type of person who, the less cash you have out, the easier it is for you to sleep, because that means you have more money at home? How much cash do u need? Are you asset rich and cash poor? How much cash do you need in reserve to be able to sleep well?

The second element to figuring out what type of investments are right for you and knowing what type of person you are is knowing your natural talents. Do you understand people better or do you shine on the business side of things? Are you a good manager or are you a good accountant?

Real estate investing is more than purchasing properties and renting them out. What do you envision yourself doing in real estate? That vision, will define what kind of real estate investment is correct for you. If your strength is in managing money and bookkeeping, direct ownership is not going to be the best fit for you. Are you a person who likes to have the control, do you want to touch and see your tenants and property? Would you rather fix things yourself and save money or not have to worry about being ripped off. Or, are you the type who doesn’t care about what replacement toilets are installed or who your tenants are, as long as things work and the rent is being paid? If that is more your personality, you would benefit from hiring a property management company to handle your investment.

The last thing to take into consideration is your current lifestyle; do you have a full-time job and money to invest? If you have no intention of quitting, you have low time. If you are unemployed and have assets, then you have high time. High time, high assets, means you can spend a lot of time diversifying and fixing up your investment. High assets and low time means direct ownership probably isn’t the deal for you. If you have high time, high risk, you are perfect for higher risk investments and being an operator in the field, being a flipper and owning turnkey properties.