You say you are investing in real estate, but I’d bet on the fact that you are actually working in real estate. In fact, most people who think they are investing in real estate are actually working in real estate instead. I can hear you right now: “Wait, what? No, no… I’m investing in real estate.”
There are several (or more) ways to be involved in real estate investing. Especially when you are just starting out, it can be really tough to sift through where to even get started because of how many choices there are of what you can do as a real estate investor. The good news is that all the choices are good. Whether you flip, buy rental properties, wholesale, do notes… whatever it is you end up doing, they are all good options and can all be very profitable. That’s the joy of real estate investing — there is something for everyone!
Now, the trick is figuring out what method to try your hand at. There are a lot of considerations in figuring out which area of real estate investing you will be the best at, and more importantly, which area you enjoy the most. For a more in depth explanation of some different facets of real estate investing, check out this article. If you read that article, you’ll see “Involvement Level” listed as one of the considerations for each method. That consideration is what I’m going to expand on here.
Alternatively, maybe you are already a long-time investor. This article may just help with some clarity, which can be good, whether you use it for general awareness or in assisting you to make a change. Or if you’ve been frustrated with any of your investing lately, maybe this will help explain something that is possibly contributing to the situation.
Investing vs. Working
If I look up “invest” and “work” on dictionary.com, I get the following definitions:
- Invest: to put money to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation
- Work: exertion or effort directed to produce or accomplish something; labor; toil
Straight investing is putting your money into something and getting returns on it (hopefully positive ones!). So your money is what brings in the return, not you. Working, on the other hand, means you (not your money) puts forth an effort into something in order to get a return.
If I break these concepts down into even simpler terms, I come up with:
- Invest: your money is the means to the profit
- Work: your effort is the means to the profit
I’ll go ahead and tell you right now, there is no means of investing that doesn’t require at least a tiny bit of work on your part. It’s impossible, unless you are literally just handing your money to someone blindly, and they are investing it for you — you never ask questions, and you get returns on it. But for the most part, every method of investing requires at least some work on your part, even if it means signing your name to something, keeping an eye on something, or even just figuring out what it is in the first place you want to get involved in. All of that is work. That’s okay, and just assume that to be the default level of work required with any investment option. However, once you start specifying different types of investments, you need to realize they all involve a different level of work on your part to make each one successful.
Now, are you ready to apply this?
Different Methods of Investing and How Much Work They Require
I’m going to jump right in and show you a few different methods of investing and the differences in how much work is required for each via a fancy-dancy graph.