A Lifestyle by Design

One of the best perks of being a real estate investor is you get to choose the specific niche and lifestyle you want. You can create a work and life balance that suits you, your family, your personality, your skillset, and your hobbies.

Following are four questions you can ask yourself as you consider your path (or next path) as a real estate investor.

1. In 5-10 years, when I have all the passive income I want, what do I want my life to look like?

It helps to start with the end in mind. Imagine you already have all the passive income you need and want. What would you do with your time? What would a perfect week look like for you?

Be as specific as you can. What do you do? Who are you with? Where are you—at home or traveling? What do you do for fun? What do you do that challenges you?

Once you have that vision, work your way backward.

If your vision includes spending a week at each of your vacation homes, maybe work toward creating a vacation rental portfolio. If your vision includes you managing a large rental portfolio with the team you created because you just love doing deals and working with others, consider working toward that now.

If that vision involves writing a book about yoga and becoming the biggest yoga influencer, then perhaps you should start creating a passive income portfolio so you have the time to pursue your yoga passion.

The last thing you want to do is go down a path only to realize—too late—that it’s not the one you want to be on. Craft your dream life now, instead of finding out five years down the road that you don’t even want to get to your destination.

2. How much time do I realistically have to allocate to investing?

Real estate investing can be a very time-consuming, active business, or it can be very passive if you’re a fund or syndication investor. Choose a path that gives you the best chance for success as an investor.

If you have a very demanding career or business and work 40-80 hours a week, realistically you’re going to want to spend your time outside work with family and friends, pursuing leisure activities and getting some rest. Choosing to be a passive real estate investor, at least to start, will likely yield the best results.

You can always choose to be a more active real estate investor later, when you have more time to allocate toward learning and working in the business. But one of the most important things is to start sooner rather than later.

If you ask any real estate investor, especially those who have invested for multiple decades, “What would you do differently?” they will likely answer: “Start investing in real estate sooner rather than later.”

Another saying you hear a lot is this: “Don’t wait to buy real estate. Buy real estate and wait.”

There are four ways to make money investing in real estate, even if you’re a passive investor:

1. Cashflow. You get recurring income each month.
2. Tax benefits. You get a deduction on your tax return because you own real estate.
3. Appreciation. The property has potential to increase in value.
4. Loan paydown. If you have a loan, the balance decreases each month, adding to your equity.

If you account for all potential expenses and purchase in a manner that yields positive cashflow, in time the other three ways usually end up going in your favor too.

If you can allocate 10-20 hours a week to active real estate investing, it could make sense to learn how to analyze, source, renovate, and manage properties yourself. Just don’t let not having enough time right now keep you from starting. The best time to start was 10 years ago. The next best time is today.

3. How much time do I want to allocate toward real estate investing?

If you just love the idea of analyzing dozens of deals, submitting offers, dealing with the financing documents, and then creating a great community for residents or unforgettable memories for guests, then active real estate investing may be for you.

But not every investor is interested in being such an active investor. Maybe you have another field you’re passionate about, or perhaps right now is the season to focus on your family or yourself. Whatever reason, it’s OK. You don’t have to be an active real estate investor to be successful.

Even if you choose not to be an active investor, you’ll have lots of opportunities to make just as much, or even much more, as you would had you invested and managed everything yourself.

By partnering with others who have created active real estate businesses, you often can leverage their knowledge, connections, and systems and resources to make great returns—for you and your partner. The beauty is you invest your capital and see cashflow increase—but they do the work.

So, ask yourself whether you want to spend extra time learning the active real estate investing skills you need to be an active investor or whether you would rather be a passive investor.

There is no right or wrong answer. And your answer can change depending upon your season of life. You can always switch later. It’s important to do what you really want versus what you think you must do.

4. What skills do I already have that I can use in real estate investing?

If you do want to be a more active investor, ask yourself:

• In a work setting, what are you good at?
• What do you enjoy doing?

Often the things you enjoy are also what you’re good at.

There are many niches in real estate investing. Being able to narrow down what you already enjoy and are good at helps your transition to becoming an active investor go more smoothly.

For example, maybe you are good at talking to people and at making deals happen.

If that’s the case, finding deals and seeing them through might be where you should focus. As with any career or work situation, there will be parts of investing you don’t enjoy or maybe you’re not the best at. But if you get positive reinforcement from what you do enjoy and are good at, you’ll have a better chance succeeding as an active investor.

You may also want to consider working with a partner who can help with things you don’t enjoy and aren’t good at, or maybe hire those tasks out. For example, if you really don’t like accounting, outsource those tasks to a bookkeeper.

Real estate investing is a powerful investing vehicle. But at the end of the day, it’s a tool. You get to decide how you use that tool to craft the life you want to live.

Take an hour or two to answer the questions raised here. If you have a spouse or partner, do the exercise with them too. Make sure to have an open and honest conversation about their answers to these questions as well. Understand they may not have the same answers—and that is completely OK. Nothing is worse than choosing a path and then realizing your partner isn’t on that same journey with you.

You can create your own ideal investment lifestyle by design. Find the direction you want to go—and focus 100% on getting there.