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Finding Your Real Estate Investment Identity: A Guide to Personalized Investing

Updated: Dec 26, 2023

Real estate investing can be a life-changing builder of wealth, opportunity, and confidence. But the term is so broad, it accounts for strategies that range drastically in how much time, skill, risk, and money are required. An investor can achieve diversification and wealth through any real estate investing strategy. However, finding the right strategy can feel like winding through an endless maze of information. The options indeed may be endless, but finding the right one for you is possible by considering specific factors in your life.

A decision tree about investing
A sample decision flow from the Real Estate Investor's Quick Start Guide by Rising Femme Wealth.


💰 Assess Your Current Financial Situation

Before diving into real estate, consider your existing investments. Do you have money in a traditional, taxable account? If not, it might be beneficial to start there before or alongside your real estate endeavors. Traditional investment accounts are more liquid, have a gentler learning curve, and often require less initial capital. This can serve as a foundation for your overall financial portfolio.


🤔 Define Your Reasons for Investing in Real Estate

Understanding your motives for investing in real estate is crucial. Are you seeking monthly income, long-term appreciation, diversification, or tax benefits? One obvious answer might be “all of the above”, but analyzing your circumstances allows you to prioritize those results. Your financial goals should influence the investing strategy and asset types you choose. It’s also a good idea to consider any specific skills you’re looking to leverage, such as design, construction, or management, or if you simply want to expand your financial literacy and own physical assets that can be run as a business. Perhaps you want to be as hands-off as possible. There’s a real estate investment strategy for that also.


📈 Evaluate Your Risk Tolerance

Real estate investments come with varying levels of risk. Consider your comfort level with risk and how much volatility you are willing to tolerate. Different types of real estate investments, such as rental properties, commercial real estate, or real estate investment trusts (REITs), carry different risk profiles. Align your risk tolerance with the type of investment that best suits your comfort level.


⏰ Determine Your Time Commitment

Real estate investing often requires a significant time commitment, both upfront and ongoing. Ask yourself how much time you are willing to dedicate to research, setup, and ongoing management. Certain types of investments, such as actively managing rental properties, may demand more time than passive investments like REITs. Be realistic about your availability and choose an investment strategy that aligns with your time constraints.


💸 Evaluate Your Initial Investment Capacity

Consider how much money you have available to start investing. Different types of real estate investments require varying levels of initial capital. Properties often require a down payment, and additional funds may be needed for renovations or construction work. Passively investing might require a hefty minimum investment. Assess your financial resources and choose an investment avenue that suits your budget.




A woman choosing from thousands of options- similar to the feeling of getting started in real estate investing.
There are endless options when it comes to real estate investing. Prepare your foundation, and choose the strategy that best fits your goals.

Strategies

Remember, there is no one-size-fits-all approach to real estate investing, and a well-informed decision will set you on the path to achieving your financial objectives. Below is a matrix that illustrates where certain real estate investment strategies fall on a risk-capital-time scale:

Investment Strategy

Risk Level

Time Commitment

Initial Capital Required

Fix and Flip

High

High (Short-term)

Moderate to High

Buy and Hold Investing

Moderate to High

Moderate to High (Long-term)

Moderate to High

Buy, Rent, Rehab, Refinance Investing

Moderate to High

High (Short to Medium-term)

Moderate to High

Wholesaling

Low

Moderate to High (Short-term)

Low to Moderate

Passive Investing in Private Equity

Moderate to High

Low (Long-term)

High

Passive Investing in REITs

Low to Moderate

Low (Long-term)

Low to Moderate


This matrix should help you assess each strategy based on your risk tolerance, available capital, and time commitment preferences, allowing you to make an informed decision that aligns with your investment goals. Below, each strategy is explained in a bit more detail.


👉 Fix and Flip

  • Risk Level: High

  • Initial Capital Required: Moderate to High

  • Time Commitment: High (Short-term)

  • Description: Involves purchasing a property, renovating it, and selling it quickly for a profit. High potential returns but comes with higher risks and a significant time commitment.


👉 Buy and Hold

  • Risk Level: Moderate to High

  • Initial Capital Required: Moderate to High

  • Time Commitment: Moderate to High (Long-term)

  • Description: Involves purchasing properties to hold for an extended period, typically for rental income and long-term appreciation. Moderate to high risk, but potential for consistent returns over time.


👉 Buy, Rehab, Rent, Refinance [Repeat] Investing (BRRRR)

  • Risk Level: Moderate to High

  • Initial Capital Required: Moderate to High

  • Time Commitment: High (Short to Medium-term)

  • Description: Similar to fix and flip, but with the added strategy of renting the property for cash flow after refinancing. Combines short-term gains with long-term income potential, and reduces the dependency on having a hot seller's market in order to make a profit.


👉 Wholesaling

  • Risk Level: Low capital risk, but other risks include: inconsistency in revenue, and complex regulations

  • Initial Capital Required: Low to Moderate

  • Time Commitment: Moderate to High (Short-term)

  • Description: Involves finding distressed properties, securing them under contract, and then selling the contract to another investor. Requires less capital but comes with a time-intensive, and competitive process.


👉 Passive Investing in Private Equity

  • Risk Level: Moderate to High

  • Initial Capital Required: High

  • Time Commitment: Low (Long-term)

  • Description: Involves investing in private real estate funds or partnerships. Higher entry requirements and potential for significant returns, but with lower time commitment as the management is handled by professionals.


👉 Passive Investing in REITs

  • Risk Level: Low to Moderate

  • Initial Capital Required: Low to Moderate

  • Time Commitment: Low (Long-term)

  • Description: Involves investing in Real Estate Investment Trusts, which are publicly traded companies that own, operate, or finance income-producing real estate. Lower risk and time commitment compared to more active strategies.


Each strategy offers an entire world of details and methodology. Don't let that overwhelm you. Instead, focus on making the right decisions based on what you have, and what you want. Let that lead you to your ideal strategy, and dig in from there.


Want to learn more? Download our Real Estate Investing Starter Guide!

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