This is the lingering question a lot of us have asked ourselves when making a decision of becoming Real Estate investors.The million dollar question, where do I start? Is a common one and sometimes difficult to answer as the options available to us (buy and hold, house flipping, short term rentals, wholesaling, private lending, passive investing) can be overwhelming.
To answer this question we first need to decide how much time do we have to invest in this new idea (will I be actively engaged on my projects, semi-active, or a passive investor which requires very little time), what is our investment personality (based on your financial risk profile which takes into account your age, financial history, investment goals), and who will be helping us throughout our journey. This will allow us to define a criteria which will be so important to setting the foundation of this new project.
If you have time and willingness to be an active investor the first step will be to educate yourself in Real Estate so you can define your niche. The less expensive way to acquire education is reading books, listening to podcasts and following blog posts online (such as this one). For others another option is to pay for a mentorship with someone in the business that can teach their Real Estate expertise (this option will be more expensive, but works for some as it helps you commit and being held accountable by your peers in the group and your mentor). You can then start investing either on your own or finding a partner that is already in the business that you decided to start on.
Partnering with someone in the business that is already successful in Real Estate is a great option as you can add value by investing in the project and being semi-active, but leveraging your partner's experience and track record. This is one of the favorite options for many who start in this business; however it can be somewhat difficult to find the right partner that will fit with your immediate needs. This is a great strategy if you want to avoid mistakes due to your lack of experience, but in a lot of cases you will have to invest a large amount of your cash so that an experienced investor will be willing to do a project with you (and usually the profit split is 50/50 and you will be funding the project completely).
If you do not have the time or willingness to be an active investor, a great option is to invest passively in Real Estate. All projects are different and the projected returns can vary significantly depending on the type of project, size of the projected and market you are investing in. You may have to spend some time at the beginning in getting familiar with the different groups that offer these type of investments, and there may be a learning curve into learning the lingo used in the deal offerings presented; however this is the option that requires the least amount of your time as once you have made a decision you simply invest and collect the returns.
I do have preferences when it comes to investing but there is no right or wrong choice when choosing a niche within Real Estate, what will work for some, may not work for others and vice versa. The only right choice is that you do make a decision and start. You may make mistakes but the experienced learned will be invaluable as you progress. Yes there will be difficulties and Real Estate is not a get-rich-quick for almost everyone; but if you willing to put the time and effort you will find this journey to be extremely gratifying.