Welcome back to the third episode in our special series, Afford Anything Presents: Invest Anywhere.
Invest Anywhere is a new monthly series that runs on the First Friday of each month. It lays out the information you need to invest in real estate at a distance.
Many of you want to invest in real estate, but you live in a high-cost-of-living area. (Ahem, California and New York). The homes in your city are prohibitively expensive, and they offer lackluster returns.
You could invest in a lower-cost area like Cincinnati, Indianapolis, Omaha or Wichita … but HOW? That sounds terrifying.
We’re here to dismantle that fear, piece by piece, by sharing our knowledge and experience.
The Invest Anywhere series is dedicated to giving you the guidance you need to make smart, confident choices about investing out-of-state.
It’s co-hosted between myself (Paula) and esteemed real estate investor Suni Rao, who’s experienced everything ranging from buy-and-hold rental investing to (accidentally) wholesaling. She’s managed short-term and long-term rentals. She’s owned houses, multi-units, and even a mobile home park.
She joins me in this episode to talk about a variety of strategies that will help you make money in real estate.
In today’s episode, we discuss six strategies that investors use to make money in real estate.
We start by establishing a framework, or mental model, that delineates strategies from tactics.
Imagine a tree. The roots of the tree represent your values (e.g. freedom). Everything begins from that root structure.
Moving up, we see the base of the tree, which represent your principles. These are formed from your values. (Example: if freedom is a value, then wise money management may be a principle.)
Further up, we find the tree trunk, which represents your goals and objectives. Perhaps financial independence / FIRE is a goal, emerging from the value of freedom and the principle of wise resource stewardship and capital allocation.
The tree trunk expands into thick limbs, which represent your strategies. This is what you do. (More on this topic in a moment).
Those limbs then form smaller branches, which represent tactics. This is how you execute the what.
Finally, the branches form a canopy of leaves, which represent products and services (tools, software, apps, business entities).
The leaves are the most prominent and visible parts of the tree, and therefore, real estate beginners will often ask questions at the leaf-level first. (For example, many people open with the question, “should I hire a property manager?” or “should I put my property into an LLC?”)
But these leaves are also the most transitory parts of the tree. These are details that form only after the roots, trunk, limbs and branches are established.
Today’s episode covers six *strategies* for investing in real estate, which means that we’re speaking about the limbs of the tree.
We organized these six strategies into a spectrum that ranges from “more passive” to “more active.”
Income-producing activities that involve handing your money to someone else – such as investing in REITS or utilizing crowdfunding platforms – occupy the “more passive” side of the spectrum.
Earning money through your own (significant!) efforts, including wholesaling and flipping houses, occupy the “more active” side of the spectrum.
And a hybrid between a hands-on and hands-off approach – including private lending and buy-and-hold investing – occupies the moderate middle.
In today’s episode, we explore the advantages and disadvantages of each of these six strategies.
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