The world of real estate can be overwhelming, with so many paths and strategies one can take. However, once one makes the decision to invest, one is often faced with the question where and how to get started. In today’s snippet we offer five key strategies on just that.
1. Educate yourself. You will be putting your hard earned money to work. Thus, at a minimum you want to understand key concepts and terminology, the pros and cons of different asset classes, deal structures, etc. A complimentary educational resource we offer to our community is our digital book “The Busy Professional’s Quick Guide To Investing In Multifamily”. You can also educate yourself via a variety of books, podcasts, online investor forums (Bigger Pockets), investment clubs (Left Field Investors), meet ups, and conferences (The Best Ever Conference, Rod Khleif’s Bootcamp, MFIN, Limitless to name a few). There are also various ways to find sources of liquidity, which we summarized here.
2. Decide on your investment strategy. Having clarity of goals will help you quickly sift through deals and pass on ones that do not meet your investment strategy and criteria.
Which investment strategy will you pursue – cash flow or appreciation or both? Is your goal minimizing tax liability instead? What asset class do you want to focus on? How diversified do you want to be? What are your target returns – IRR, CoC, AAR, EM? Answers to this question will guide you towards investments that meet that objective.
3. Find deals to invest in. First you want to identify sponsors that you know, like, and trust. You can find such sponsors via referrals, meet ups, conferences. This is especially important if you are not an accredited investor, as such 506B deal require that you and the sponsor have a pre-existing substantive relationship before you can participate into their deals. Subscribing to the sponsor’s newsletter and social media feeds is a good way to get to know them. Alternatively joining investment clubs and tribes can also offer exposure to a variety of sponsors.
4. Analyze the deal. Once you are presented with an opportunity you will be able to analyze the deal, attend the deal webinar, and ask questions to ensure you are comfortable with the investment relative to your risk tolerance/goals/strategies, understand the key risks and how they are mitigated, and the sponsor’s business plan. You will also have an opportunity to review the private placement memorandum (PPM) and ask questions.
5. Take action. Last but not least, the most exciting part is choosing an investment opportunity and taking action to join in, so you can let your hard earned money work for you. Do not get bogged down in analysis paralysis. Real estate is a long term game and results rarely arrive over time. Therefore, the sooner you start and with proper diligence, the sooner you will start to see the fruit of your efforts over time.
6. Track your progress. You can create your own deal performance tracker, use free ones available (Joe Fairless LP Tracker), or pay for a software like Vyzer. This will help you stay on top of your investments, especially when you start accumulating many.
The real estate investing journey can be a daunting one. But with proper preparation, diligence, networking, and taking action, it can be quite rewarding.
Should you have any questions or want to learn more about real estate investing or for an overview of our target markets, please reach out to info@dbacapitalgroup.com.
Disclaimer: The information presented does not constitute legal, accounting, tax, or individually tailored investment advice. Past results do not represent or guarantee future performance.