You’ve heard of friends investing in real estate and seen them grow their money fast. You know that the richest people in the world have done so through real estate investing. And you’ve even seen people quite their jobs because of cashflow from real estate.

But you have no idea where to start.

We’ve been there. Real estate investing felt like something other people did, who knew something that I didn’t know. They must have some sort of skill set, or degree that I didn’t have to see those kinds of returns.

Not true. 

What is true is that real estate investing is incredibly diverse. The good news is that there is sure to be an asset class and real estate investing strategy that works for your lifestyle. Bad news is that it can be overwhelming to break into with no previous knowledge.

We’re here to break down that barrier and get you started with real estate investing for your unique lifestyle.

In this guide we’ll answer these questions:

1. Does real estate investing fit my lifestyle and goals?
2. What are the different types of real estate investing strategies?
3. Does real estate investing require a lot of my time?
4. How do I get my money working for me in real estate?

And most importantly, we’ll cover how real estate investing may fit into your unique lifestyle. 

True, we may not know you and your lifestyle specifically, but we do know how the different types of real estate investing impact our day-to-day lives. We also know you are here because you value your time. Pursuing a certain lifestyle requires clear goals and the knowledge and plan to reach those goals. 

Dream Lifestyle = Clear Goals + Knowledge + A Plan

Here comes some knowledge for you to fill in that equation. Be sure to join our Flow State Investor Circle if you want to jump on the plan. 

Does real estate investing fit my lifestyle and goals?

This is the best question for a newbie real estate investor to ask. 

Before diving into a youtube spiral of research, why are you interested in real estate? 

Determining your lifestyle and financial goals can be the first step to knowing if real estate investing is right for you. From there, you can also begin to narrow down which type of real estate investing can help you get to your ideal lifestyle and goals quicker.

You can start by asking yourself some questions:

1. If I could do anything with my time with no worries about money, would I be doing what I’m doing?
2. Am I happy with my current financial situation? If not, where do I want to be?
3. How much money do I need to quit my job or retire early? 
4. How much time do I want to spend with my real estate investing?

Getting a broader view of these questions will refine your WHY. You’ll hear this term a lot. 

Your WHY is a summary of what you want to accomplish with your investing. For instance, do you want to create passive income streams so you can quit your job and travel the world? Or, do you want to design new homes and flip houses full time? Or do you want to get your retirement funds out of the volatile stock market and put them in real estate? 

Hold onto your WHY. 

Real estate investing is full of shiny objects. Or rather, there are new, exciting, and potentially massively lucrative strategies everywhere. 

It can be easy to hear about one person’s method and get excited that it will work for you as well. Then you find that the time required is killing your health or social life, or that the investment timeline is too long or too short. 

You remember WHY you are investing in real estate and decide to change course.

It has happened to us and it definitely wastes precious time and money. Instead, get clear on what you have to work with, how you want your life to change, and where you want to end up. These answers will save you time and money.

What are the different types of real estate investing strategies?

Now that you know a bit more about what you are hoping to get out of real estate investing, let’s talk about different ways to reach your goals.

Trying to describe all forms of real estate is like asking someone to describe all the campsites along the Pacific Crest Trail. Too much diversity. So we’ve chosen some of the broader and more popular categories here.

Start thinking about how each of the following 7 real estate investing strategies might fit into your lifestyle and never forget your goals. 

1. Turnkey Rentals
2. Fix and Flip
3. Notes
4. Short Term Rentals
5. BRRRR Rentals
6. Multifamily Syndications
7. House-Hacking

A Note on Risk

All of the strategies covered below pose some forms of risk. All investments do. However, risk is mitigated differently in each strategy. This largely depends upon your knowledge of markets, how to manage different asset classes, population dynamics, and more. 

You’ll want to know how much risk you are willing to take. The more you don’t know, the more risk you have. Even if you are an expert, investing in real estate will always carry risk. However, many of these strategies require much higher levels of risk tolerance than others.

A Note On Returns

Generally, the more active a person is, the higher returns they’ll see. The more passive an investment, the more average the returns.

Of course, this rule gets broken all the time. 

In real estate, investors can hit it big by finding the right partner, the right market, or the right timing. Unfortunately, only one of these elements can be controlled: the partnership.

Partnerships in real estate investing allow groups to come together to take on bigger opportunities that often lead to bigger returns. Partnerships also allow everyone to leverage their own biggest asset: knowledge or capital. 

The Strategies: Top 7 Most Popular Ways to Invest In Real Estate

1. Turkney Rentals
2. Passive Syndications
3. Fix – and – flip
4. Notes
5. Short Term Rentals
6. BRRRR Rentals
7. House Hacking

1. Turnkey Rentals

Purchasing an investment home (single-family or small multi-family like a duplex or triplex) can be done through a turnkey company. The company purchases the home, fixes it up, puts tenants in it and often manages it themselves. Then, they sell the full package to an investor.

Growing a single-family rental portfolio this way can be easiest. Do the research on one market and systematically start buying done-for-you rentals in that market. Or multiple markets. 

Expect to spend time researching the market, both regionally and within the neighborhood. You’ll also want to seriously vet the turnkey provider you go with. While a lot of the up front work has been done, you’ll need to manage any property manager you have in place. Are they marketing the property to reduce vacancy time? Are they doing regular inspections to detect repairs early?

Putting money into any type of smaller rental also makes the cashflow dependant upon just one cashflow stream. When a single-family property goes vacant, there are no backup cashflow streams to take its place. Proper due diligence and analysis can make this less of a problem. 

Turnkey Rental Summary

Level of Effort: Medium – vetting turnkey providers, understanding different markets

Time: Medium – market research, property management oversight

Money: High – investment properties often require 20-25% down payments, 

2. Passive Syndications

Those big apartment buildings you see downtown? Those were likely purchased as a group investment called a syndication. Same goes for the big self-storage facilities you see, as well as many other larger real estate buildings.

Flippers look for under-market value homes and put in the effort to bring them back up to their top market value. They manage large renovation projects, deal with multiple contractor teams, build relationships with hard money lenders and even dabble in home design. That may sound like a lot of work, but just as with any big initial efforts, creating the right team can make this easier. Once flippers find that reliable contractor or buildings supplier, they can scale quicker.

Real estate syndications bring together active real estate professionals called the operators and a group of passive investors to purchase an asset. The operators perform all of the work and the investors split the cash flow in two ways: from the rents collected and the profits from the sale.

Passive investors in real estate syndications do not take part in any form of management of the asset (they are also more legally protected as Limited Partners of the deal). This can be nice for many. Kick your feet up and relax with cash flow coming in. Most syndications show potential returns of anywhere between 7-10% annually with more coming at the end of the sale (such as an IRR of 13-18%).

The biggest barrier to entry here is education and access. You’ll want to know what you are looking at before joining a group investment. Also, many are only open to accredited investors. Some syndications can take money from non-accredited investors, but they can be more difficult to find since they can’t be advertised.

Syndications Summary

Level of Effort: Low – initial syndicator or deal vetting

Time: Low – initial deal and operator vetting

Money: Medium- generally require $25k – $100k to invest.

3. Fix and Flip 

This form of real estate investing can be considered short term capital gains income (big chunks of income as a return) rather than providing a steady cash flow over time. Most investors here will be local to the actual properties, although this can be done from a distance as well. Again, it comes down to having a reliable and hard-working team to back you up.

Fix and Flip Summary

Level of Effort: High – evaluating property and market potential, understanding home layout, etc.

Time: High – managing multiple team members, continually sourcing deals, juggling multiple projects at once

Money: Medium – Can leverage hard money lending, but does require capital for down payments and (typically) construction costs.

4. Notes

Notes are the paper side of real estate. Investing in notes means buying performing and non-performing mortgages and cash flowing off the interest. We often think of banks in this role since most of our primary residence mortgages are through these larger institutions.

Growing money in notes, however, can actually require very little of your time when you partner with an experienced team. Most investors who have money in notes work with the teams that do all the heavy lifting. 

Risk is mitigated in a number of ways. First, an extensive due diligence process can weed out a lot of bad deals. You’ll want to be sure this is thorough. Second, notes are typically purchased for pennies on the dollar with multiple exit strategies possible to get the base return.

Finally, notes are secured by the actual property. A secured investment always helps an investor sleep better at night.

However, if you are interested in doing it all yourself, you would need to fully understand the extensive due diligence required for the asset, the borrower and the paper trail. This relies on relationships and systems for getting local boots on the ground and communicating with the borrower, among other things.

Notes can provide a range of returns that are most often considered long-term capital gains income, since a return on capital often takes at least a year, often 2-3 years. It is considered a medium-term investment for this reason since capital isn’t held up for years.

Most people looking to invest in notes work with an experienced team to leverage potential returns of 10-15%. 

Notes Summary

Level of Effort: Low – vetting partners and understanding the process

Time: Low – Joining for key decision points in the management of the asset

Money: High – requires initial capital to purchase note, no leveraging debt (you are the debt!)

5. Short Term Rentals

Creating a portfolio of Short Term Rentals (STR) means having homes or apartments that are rented out for less than a month (typically) on platforms such as AirBnB, Bookings.com, VRBO and more. Some STR businesses don’t actually own the real estate, but manage the listings instead. 

Short term rentals provide excellent monthly cash flow, sometimes double what a long-term renter might pay. However, the management of the rental often takes a lot more time than managing for long-term. There are management companies, but they are more expensive and harder to find. 

With the proper systems, even the management tasks can start to be automated, like daily guest communication, pricing, cleanings and maintenance.

Short Term Rentals Summary

Level of Effort: High – same education as long-term rentals with extra effort for marketing, listing, and designing home for short term use

Time: High – Intense management systems

Money: Low to Medium – less money required for starting out managing other listings, more money for down payments and furnishings if investing

6. BRRRR Rentals

Ahh, BRRRR (that’s 4 Rs). This type of investing has been popularized (or at least named) by BiggerPockets guru Brandon Turner. It stands for buy, rehab, rent, refinance, repeat.

This first involves finding a property that needs some work. However, running the numbers is important here because once the property is fixed up, you’ll be renting it out and still will want to make a profit. That profit is determined on how much you’ll be able to get when you refinance the property. This is dependent upon the ARV, or the after repair value. 

This takes a lot of skill and expertise, and certainly a lot of time. There can be some big payoffs. Most people shoot to have a cashflowing property and refinance all of their initial invested funds out of the deal. This is where the repeat step comes in. With that original capital, investors take it to go do the next deal.

BRRR Rentals Summary

Level of Effort: Oh so High – managing rehab, sourcing deals, knowing market, building financing relationships and more

Time: High – hands-on management of the process then management of the rental

Money: Medium – Initial capital required, but can be re-used to build portfolio

7. House Hacking

Leveraging your primary resources as a real estate investment is one of the easiest ways to break into real estate investing. That is how I got started. It is also why I quickly moved into note investing.

House hacking involves renting out a portion of your primary residence while you currently live there. Most people move out of the home after the primary residence loan requirements have been fulfilled and transition it to a full rental. 

Expect to manage your tenants (and deal with them on a more intimate level since they are on the same property). While you can hire property management, most people don’t. 

House-hacking summary:

Time: Lots – research markets, managing tenants, maintaining property

Money: Less, but some. Often 3-10% down payment, any repairs/maintenance or renovations required.

Level of Effort: High – you manage property, you deal with tenant issues, you maintain the asset.

Takeaways

We’ve only scratched the surface here. Instead of being overwhelmed, remember to always go back to your goals.

What are you wanting to achieve here? 

What do you have to work with?

How much time do you want to spend on your investing?

These will be the most helpful in guiding you toward a strategy that works for your lifestyle. There are always way for you to get started investing in real estate. There are partnerships where you can put in some time and sweat equity, and there are passive deals where you don’t have do do much at all.
Mostly, remember that real estate gives you a different investment opportunity than you’ll find in the stock market and most other common investing vehicles. You typically have the ability to invest in better market locations, different asset classes, and also make a positive impact in local communities. Find a stock that does that.