There are two main kinds of real estate investors dotting the investing landscape in America today – Do It Yourselfers and those who prefer to take a more managed approach to real estate investing. In this article, I’ll explain the primary characteristics of both, which will help you figure out exactly where you are on the real estate investing food chain, as well as the best way for you to tap into all of the profits available in real estate today.
Do-It-Yourselfers: Getting Down and Dirty in the Real Estate Investing Trenches
The main characteristic shared almost universally by do it yourself real estate investors is a hand’s-on approach. This investor relishes the thought of getting his (or her) hands dirty and fully immersing themselves in the investing experience. This includes wearing as many “hats” as there is real estate investing functions, such as:
· Locating properties
· Putting together cash flow projections
· Learning the real estate market in each and every neighborhood in which they choose to invest
· Making offers
· Negotiating prices and terms
· Obtaining financing
· Managing properties (finding tenants, ensuring that rent is paid on time, and dealing with late night and emergency maintenance calls)
· Evicting tenants
· Rehabbing properties (or hiring qualified contractors who serve this function)
In short, a real estate investor who chooses to do it themselves is knee-deep in the real estate investing experience, willfully choosing to handle all aspects of real estate investing from the perspective of maximizing profits in exchange for a larger piece of the ownership pie.
The DIY real estate investor typically falls into one of two categories: They either can’t afford a fully managed solution, or they simply aren’t aware that a less work-intensive real estate investing model exists.
Fully Managed Real Estate Investing: Seizing the Mantle of Success
The second real estate investing option is a fully managed real estate investing platform. With this form of real estate investing, an investor invests capital in an investment in one of two ways: By purchasing a specific property that yields monthly net cash flow, or by purchasing a percentage of a property in exchange for a share of that property’s net income.
While a DIY real estate investor often finds plenty of work in the real estate ownership process, a fully managed investor reaps the financial benefits that come from the investing experience, without having to deal with many of the inconveniences related to traditional real estate investing.
Investors who choose to go the fully managed route are typically busy professionals, business owners, or retirees with better things to do with their time than take a massive bite from the DIY real estate investing apple. These investors make a calculated decision to invest in real estate using a fully managed approach, understanding that the cost associated with fully managed real estate is a small investment that yields huge dividends, in terms of time and financial freedom.
So, Are You a DIYer or a Fully Managed Real Estate Investor?
Let’s face it. Each of us is at a different place in our lives, with truly unique experiences and real estate investing qualifications. While some real estate investors relish the thought of working in their investments, many others prefer to let their investments work for them. Where are you on the real estate investing food chain?
To help you decide, ask yourself these questions:
· How much cash, credit or investing capital to you have?
· Do you prefer to get your hands dirty or are you content to let others do the heavy lifting?
· Is your time a precious commodity, one that always seems to be in short supply?
By answering these questions, you’ll have a better idea of where you are as a real estate investor. Remember, because we are all unique individuals, there is no right or wrong answer to these questions. If you aren’t where you want to be right now, don’t worry. If you’re a DIY investor right now, you may reach a point in the future when you decide that a fully managed investing approach is the smartest decision you can make. At that point, you can make the switch.
In the long run, this decision comes down to where you are right now in your life. If you’re squeezing each dollar so hard that a cold, dead President’s eyes bug out, a fully managed approach might not be the best choice for you. But if you want to enjoy the perks that come from real estate investing without devoting precious time resources to active investing, a fully managed approach just might be what the doctor ordered.
If you’ve tried both real estate investing systems, which do you like better? Why? Tell me in the comments below. I really want to know!