Real Estate Focus—Finding Your Niche
One of the first questions asked when meeting someone new is, "What do you do for a living?" This type of question is a natural conversation starter as it gives us some small insight into the other person. Typically, this leads to a casual conversation about their job. You will likely hear about what they do, what they like or dislike about their job, and why they chose that particular field.
When asked some form of the question, "Why did you choose to go into that occupation?" there are likely to be a variety of answers. The responder might say that their chosen occupation was their childhood dream. They might also respond that they had skill sets that made that occupation appealing, that the money was good, or that the field was one where they felt they could make a difference. Aside from these answers, there is another answer that is, unfortunately, far too common—some form of "they were hiring." It is a common tale that a temporary job obtained through a friend, relative, or job service ends up as a career. People whose careers are determined through this path often get to a place in their life where they get comfortable, and don't venture out to find an occupation that might be more rewarding, personally or financially.
The Real Estate Comfort Zone
Many newcomers to real estate enter the field with enthusiasm and excitement. They are working for themselves, and have broken free of the 9-to-5 chains. As with other lines of work, however, real estate entrepreneurs can soon find themselves in a comfort zone—typically, a one-strategy rut. For example, the most common real estate strategy new real estate investors utilize is the buy-fix-sell model. If the novice real estate entrepreneur makes money using this strategy, they will likely repeat it. Before long, the investor may look back and realize that is the only strategy they have used for years!
While the investor may be achieving some level of success, he soon becomes one dimensional. Even worse, being a one-strategy investor limits the amount of deals they can be a part of. There may be other areas that are more exciting, offer more potential rewards, and/or are better suited to fit their lifestyle.
Being a one-strategy investor can be successful; many seasoned real estate veterans have found one strategy that they enjoy, become an expert at, and specialized in. The main point is that these veterans are usually well-versed in numerous strategies, and eventually settled with the one that best fits their strengths and fulfills their personal and financial goals. As a real estate investor, this is where you want to be—specializing on the strategy or strategies that best suit you.
For those new to the real estate world, or for those seasoned vets who want to try something new, here are a few strategies outside the traditional buy-fix-sell model.
Property Management and Cash-Flow Properties. Many new real estate investors shy away from this strategy because they are uncomfortable with the thought of managing tenants. This is unfortunate because there is perhaps no better manner of generating multiple streams of income. One of the fundamental principles of the Rich Dad philosophy is to generate cash flow to escape the rat race. This strategy can give you great flexibility in how you handle deals depending on the particular market conditions, and get you to your goal that much sooner.
Wholesale Buying. This is a great strategy for beginners who are lacking the financial capital to complete a deal on their own. It also works tremendously well for investors who want to actualize a profit on a deal they discover, but have too much on their plate at the moment. Whether you ever utilize this strategy or not, you should be familiar with it because it provides opportunities to become part of deals that you otherwise would not be able to.
Tax Liens. This is an area that the vast majority of new real estate investors never even look into. For many who do look into it, they wonder why they ever tried to do anything else. Tax-lien opportunities exist in every state, and can be the type of strategy that becomes your niche or an additional means to expand your investment portfolio.
Properties in Probate. This is another potential niche strategy for the right investor. Similar to tax liens, it is an area that most new real estate investors never even think to investigate. Becoming knowledgeable in this area increases investors’ ability to find motivated buyers.
Commercial Real Estate. This is another area that new real estate investors often overlook because they fear it is beyond their skill set; however, when combined with wholesaling strategies, it can provide even the beginner investor the ability to make the big deal. For those that hold onto the property, it is an excellent source of cash flow that can lead to a quicker escape from the rat race.
In the coming months, this newsletter will discuss real estate strategies more in depth. In addition, Rich Dad education offers courses in these and a wide variety of other strategies. Real estate investors should never limit their potential simply because they have found a comfort zone. If you find a niche in the real estate market, it should be because it was a choice, not because it was something that you simply fell into.