What Is Your Real Estate Investment Style? (A Four Part Series)
What is your Real Estate Investment Style? Regardless of what you do for a living, when you invest in real estate it is imperative you run the investments like a business. You want to be able to build a real estate power team and to be effective with your team, you need to share a clear investment vision.
Having a clear vision starts with identifying what type of investor you are. Most real estate investors never give their investment style any deliberate thought. Having worked with hundreds of investors, I know that those who do not create clarity within themselves find that they are all over the board when it comes to investing and as a result do not become an effective real estate investor. To be effective in real estate investing, it is imperative that you focus your attention on what you want from your investment.
- The cash flow investor
- The capital growth investor
- The lifestyle investor
You may be thinking that you want all of these things (who wouldn’t), however one of these categories most likely comprises your first and most powerful objective. Of course, it is important to have realistic expectations.
Many people want to buy a pristine property in a pristine location and expect to get pristine cash flow and pristine capital growth returns. I too would love this, but here is where you must become a realist. Understanding what each investment class truly looks like will set you up for success.
Before we look into the 3 different investment strategies, let’s get clear on the neighborhoods that will make up most US cities. To illustrate this, we will talk about properties within locations. We will break them down to A, B, C And D neighborhoods within any city that you are anticipating a purchase.
A neighborhood - is where everyone wants to live. There are typically white collar workers living here and most homes are owner occupied with very few tenants. They are the expensive pristine homes that often are within a highly sought after community. Even a gated community perhaps.
B neighborhood - is where you typically will find your middle to upper middle class family living. A mix of white collar and blue collar workers. These neighborhoods will have a higher concentration of owner occupied properties with a mix of tenants usually 30% or less.
C neighborhood - these are your middle to lower middle class neighborhoods. Hard working blue collar workers and owner occupied properties may be 50 to 70%.
D neighborhood - these comprise the rest with typically a lower concentration of owner occupied properties.
With this clarity in hand we can focus on attributes for each investment strategy, where within an area you will find each one of these and how to best capitalize on them. Let’s start in our next post with the cash flow investor.
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