The 4 Main Investing Strategies + 2 Main...

Some real estate investors wholesale. Some rehab. Others rent…

How do you know which approach is right for you?

Hey Moguls, Cody Sperber here, and I think that the best way to figure it out is to have an investing strategy.

In this lesson, I’m going to give you a crash course on the 4 main investing strategies. Then we’re going to talk about 2 key investing principles you need to understand in order to really take advantage of your investing strategy.

To get the most out of this lesson, you should know the difference between titles and deeds, which I covered in a previous lesson, and the 4 ways to take a joint title, which I also covered. So, if you haven’t gone through those lessons, you should.

Otherwise, let’s get crackin’…

The 4 Main Investing Strategies (aka: My “4-Square Strategy Matrix”)

Here’s a quick overview of my investing matrix:

Wholesaling
Rehabbing (Buy, Fix & Flip)
Creative Real Estate Investing
Rentals (Buy, Fix & Hold)

So which strategies are right for you?

First off, I strongly encourage you newer investors to set both short-term and long-term goals for your businesses right from the start. And these goals should take into account the type of income you’re aiming for (fast cash vs. cash flow), as well as your current available resources.

So you’ll be asking yourself:

Am I all about chunks of cash? (transactional income)
Or is cash flow more my goal? (residual income)
Do I have access to cash/credit to leverage?
Or am I basically cash/credit broke? (for now)

Now if you answer honestly, you can tell pretty fast which strategy will be your best primary focus. But I always suggest keeping an open mind, because any lead could take on a life of its own.

strategy In fact, I prefer presenting more than one offer to a motivated seller whenever possible—maybe one is cash, one is terms and one is a combo of the two. Because you never know what kind of opportunity you can open up for yourself with a little creativity. (More on that in a minute.)

But generally, your short-term goals and resources will chiefly determine which of the 4 categories any given lead ends up in—or at least which category you’ll strongly favor.

Strategy #1: Wholesaling

Wholesaling is a great investing strategy because it requires little to no cash and is one of the fastest ways to get paid as a real estate investor because wholesaling focuses on—you guessed it—controlling real estate instead of owning real estate.

And, there’s very little risk to you (if any) being a real estate wholesaler.

Strategy #2: Rehabbing (Buy, Fix & Flip)

The buy, fix & flip strategy, otherwise known as rehabbing houses, is also a great investing strategy that does require a little bit of money to accomplish, but can be done using other people’s money.

What’s great about rehabbing is that you can maximize your profits by buying way below market value and hiring somebody else to make the repairs for you, and then have a local real estate agent actually sell the property for you for top dollar on the retail market.

Strategy #3: Creative Real Estate Investing

Creative real estate investing is actually a series of investing strategies including sandwich lease options, wraparound mortgages and subject-to transactions.

Typically, creative real estate investing requires little to none of your own money or credit and results in you collecting cash flow over time until you sell the assets some time down the road.

Strategy #4: Renting

Renting (also referred to as buy, fix & hold) is similar in that it also produces cash flow over time until you cash out and sell the asset.

This investing strategy is designed to be a long-term wealth-building strategy that’s going to require financing, even though it doesn’t have to be your own money (the tenants pay it).

Okay…

Now it’s time for 2 very important principles in residential real estate investing

The Principle of Control vs. Ownership
The Principle of Arbitrage

Principle #1: Control vs. Ownership

You can separate the different pieces of ownership. And the way that you can do that is through a concept of equitable versus legal title.

Equitable Title is defined as the “right” to obtain ownership of real property. In other words, you have a contract to purchase a property but you haven’t actually closed on it yet. As soon as you complete the terms of the contract and you close on the transaction, you’re going to gain legal title.

Legal Title means your name is now on the deed as the legit owner of the property.

I want to say it one final time just to make sure you understand…

Take Note: When a contract for the sale of real property is executed, equitable title passes on to the buyer. When the conditions of the sale contract have been met, legal title passes on to the buyer. Some investing strategies focus on controlling real estate (strategy #1, wholesaling) while others focus on actual ownership (strategy #4, renting).

Principle #2: The Arbitrage Principle

Another important concept I want to share with you is this concept of arbitraging the market or The Arbitrage Principle.

Arbitrage is defined as the practice of taking advantage of the price between what a motivated seller is willing to sell for and what a motivated buyer is willing to buy for.

In its simplest form, it’s the concept of controlling real property in order to make risk-free profit.

Remember, as a real estate investor, the idea of controlling real estate without actually owning it is very important.