Should You Focus on One or Multiple Real Estate Investment Strategies?
There are as many types of real estate investment strategies. However, there are a few basic principles that investors weigh and debate. One pressing question is whether it’s better as a real estate investor to focus on one strategy or more than one.
Most, if not all, investors begin their real estate careers by focusing on one investment strategy. Although, some investors will start out with multiple strategies, like fix-and-flipping and wholesaling, or fix-and-flipping and rentals, or a combination of passive and active investing, or acting as a real estate professional (i.e. in the real estate agent or property management professions) while investing on the side. But, since the majority of first-timers focus on one strategy, the question really is whether it’s better to continue to focus on your initial investment type or to expand and transition into another.
Should You Determine Your Focus?
Another distinction to make before getting into your responses is between the types of real estate investment strategies and your focus. For example, I personally own three single-family homes and have syndicated over $300,000,000 in apartments. Even though I am technically involved in two distinct investment strategies (SFR rentals and apartment syndications), I wouldn’t say that my focus is on SFR rentals. However, for someone who completes 100 fix-and-flips per year while also wholesaling 30 to 50 properties is an example of an investor who focuses on more than one strategy. I posed the one versus multiple strategy question to several top investors. Here are their responses.
Know One Strategy Well
Of all the responses, three individuals were of the belief that investors should focus on a single strategy. Brie Jazmin advises that you focus on one strategy and know it very well. Eric Kottner thinks that investors should be highly specialized in one investment strategy. Randy Ramadhin has sampled a few different strategies, found the one that worked best for his particular situation, and focuses solely on that. So, it took trying multiple strategies before he came to the conclusion that one great strategy is the best approach.
Try Your Hand at More Than One
All of the other responses were on the side of focusing on multiple types of real estate investment strategies. Although, they did not believe that ALL investors should focus on multiple strategies at ALL times. For example, Danny Randazzo thinks that, assuming you know your market and you selected a market that has really good growth potential, it is better to expand to more strategies in one solid market instead of expanding into other markets using the same strategy.
Two investors think that, before expanding into other investment strategies, you need to master one strategy first. Kris Ontiveros said to focus on one and automate by creating systems (or hiring great team members) before you consider moving onto or expanding into another strategy. And Neil Henderson advises that the average person should only focus on one strategy. But once they’ve mastered it, they can consider branching out from there.
It Depends on Your Goals
Julia Bykhovskaia thinks that, in theory, focusing on and understanding one investment strategy makes sense. However, that is not the case in practice. If real estate is all that you do, you will have multiple goals that one type of real estate investment strategy cannot achieve (or at least not easily). You need money to both live off of in the here and now, as well as to use to invest in your longer-term strategy. So, if the longer-term strategy is apartment investing, for example, then you might need to supplement your apartment investing strategy with another one, like flipping, wholesaling, short-term rentals, in order to accomplish your shorter-term goals of generating profit to pay the bills and to invest in apartments with. However, on the flip side, the difficult part with this approach is avoiding the real estate “shiny object syndrome” to stay focused and not overextend yourself.
Similarly, Ryan Groene thinks that it also depends on your investment goals. Some people see opportunities across many asset classes while others focus on one and still make money. Sam Zell is a rare exception, because he was a top investor across many asset classes for a long time and is still the top owner of mobile home parks.
Finally, Ash Patel discovered, due to his experience living through two market crashes, that good strategy depends on the timing. In terms of real estate, single family, multifamily, commercial, industrial, and medical all have someone different cycles. Additionally, if you can trade in several non-real-estate-related investment types, like energy, equities, currency, commodities and – his favorite – startups, you can attempt to exploit those markets too.
Essentially, it’s up to you to determine the types of real estate investment strategies you wish to pursue, and only you can decide whether or not you’ll focus on just one or branch out a bit. To learn more and get help creating your unique strategy, consider enrolling in my Private Real Estate Program!
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.