Are you interested in leveraging the power of real estate as an investment vehicle?
Before you begin your investment journey, you need to get clear on your investment goals.
Having a clear understanding of your goals will allow you to stay focused and make quick decisions when investing.
Setting Your Goals
When you invest in real estate, your money goes to work in a lot of ways.
Some investors invest for cash flow, others for equity growth & appreciation.
Not everyone’s goals are the same…ask yourself, “what are my financial goals and how can real estate help me achieve them?”
Here are 3 questions to consider when setting goals:
- Cash Flow, Appreciation, or Both?
- Passive vs Active?
- Why invest?
Let’s break down each.
Cash Flow, Appreciation or Both?
Determining whether you want to focus on cash flow, appreciation, or both will help you identify the right investment strategy.
Cash flow provides a steady stream of income from passive investments, while appreciation refers to the increase in the property’s value over time.
Both can offer financial benefits, but your choice will depend on your:
- Personal financial objectives
- Risk tolerance
- Timeline
Some investors, at their current stage in life, don’t need the cash flow dividends. They have a great, high-paying job.
Instead, they are more concerned about appreciation. They want to invest in a quality asset they believe is going to appreciate over time.
Others are approaching retirement or trying to retire early from a career. Cash flow is important for their daily life.
It’s important they invest in projects generating cash flow dividends on a regular basis.
Creating Equity
Real estate investing can be either passive or active.
Passive investing removes all hands-on management. The lead sponsor/operator handles all daily management. Your only job is to invest your capital after doing due diligence.
Your only monthly responsibility is to review all reports and hold the sponsor accountable.
Active investing, requires more involvement. Active investing might include flipping houses, managing rental properties yourself, or developing real estate projects from the ground up.
Your choice between passive vs active investing will depend on your available time, expertise, and interest in managing the properties.
If you work a full time job, have a family, and like to travel, active investing can be very time consuming.
Most of my clients who fit this description enjoy their careers and prefer passive investing with a trusted partner.
Why Invest?
Understanding your motivation for investing in real estate is crucial for setting your goals and staying committed to your investment plan.
Common reasons for investing in real estate include:
- building wealth
- generating passive income
- diversifying your investment portfolio
- achieving independence from your career
Reflecting on why you want to invest will help you maintain focus and make better investment decisions aligned with your personal values and objectives.
It will become easy to pass on an opportunity that doesn’t meet your goals when you understand what they are.
Summary
Getting clear on your investment goals is essential for a successful real estate investing journey.
Considering the three questions mentioned – cash flow vs appreciation, passive vs active investing, and your motivation for investing – will help you define your goals and investment strategy.
By understanding and prioritizing these aspects, you can make informed decisions that align with your unique financial aspirations and set yourself up for long-term success in real estate investing.
If you need help discussing your financial goals and discovering how real estate can play a part in reaching them, let’s connect. Fill out this form so we can schedule a discovery call.
