Determine the Right Style of Real Estate Investing For You

Real estate is an industry with so many aspects that anyone can find a profitable way to build wealth that is suited to his or her particular talents and interests.

Should you specialize in a particular area? You can, but you don't have to. Many people specialize in types of real estate that generate positive cash flow: single-family houses, apartments, or rooming houses. Others find a particular niche and focus exclusively on that: rehabs and fixer-uppers, for instance. You can choose to start with one type of real estate, especially if you're operating with limited capital, and expand into other areas as you generate cash and equity.

If you're relatively new to real estate investing, you have to start somewhere. The following is a breakdown of how you can get started based on your financial situation, your skills, and your personal interests. Use this as a guide to determine the best ways to invest in real estate, and some of the best investment options, based on your individual skills, capabilities, and interests.

1. Do You Own Your Own Home?

Yes: Consider ways to increase the value of your property: renovations, additions, improvements. Remember your home is an investment as well as a place to live, if the improvements you make are attractive to you, they will be to other buyers.
No: Unless you live with your parents and plan to continue living with them, the first real estate investment you should make is to purchase your personal residence. If you're paying rent, you're paying someone else's mortgage, plus you don't benefit from the appreciation of the property.

2. Do You Have a Down Payment and Good Credit?

Yes: Consider bank financing. You can probably qualify for excellent terms, and in addition you'll build a business relationship with a lender that will be beneficial in the long run.
No: Consider seller financing or lease options. Sellers often are much more flexible in offering terms to buyers with poor credit. In addition, work hard to improve your credit rating, pay all your bills on time, and work to pay down your debts. The better your credit rating, the more readily you can get financing and the easier it will be to invest in real estate.

3. Do You Have Carpentry Skills?

Yes: Consider rehabs and fixer-uppers. Instead of paying others to do the work, you can do so yourself, in effect you'll be paying yourself a wage in addition to increasing the value of the property. Keep in mind, though, that rehabs can take considerable time to renovate, so make sure you have that time available.
No: Focus on buying rental properties, on wholesaling properties, or on other investments where your personal "sweat equity" is not required. Or, find skilled craftsmen who can do the work for you on rehabs or fixer-uppers.

4. Do You Like Working with People?

Yes: Consider buying and managing your own rental properties. You'll save on property management fees, and you'll build relationships with local lenders, government officials, and craftsmen. You may even rent to tenants who later will become buyers of other properties you invest in. In addition, you can consider selling your properties yourself instead of using the services of a real estate agent.
No: If you invest in rental properties, use the services of a property management firm. You'll probably also want to use real estate agents to sell your properties. Landlords have a number of interpersonal dealings with tenants; if you don't like working with people, managing your own properties will be frustrating.

5. Do You Have Solid Financial Management Skills?

Yes: Consider handling your own accounting and bookkeeping. You'll have a better sense of the day-to-day health of your business. On the downside, if your investments are substantial you'll find you spend a lot of time handling the clerical tasks necessary to run your real estate "empire." At that point you may decide you're better off handing the clerical duties to someone else while you focus on finding and making great investments.
No: Educate yourself: attend seminars or take classes. Or, utilize the services of an accountant you trust.