Is it best to niche down, or be a generalist?

Question

I'm a new full-time real estate investor, and I'm having trouble figuring out my strategy. I've developed a relationship with a mentor that does new SFH/2-4 flat development, SFH/2-4 flat fix and flips, wholesaling, BRRR strategy and even some larger syndication all at the same time. In terms of location, it doesn't matter where the investment is, as long as it's in Chicago (not the south side) or the surrounding suburbs. Historically, in my past businesses, I could be caught saying "riches are in the niches", so I'm having trouble jumping on board with his strategy. While he's successful, his strategy or lack thereof seems all over the place, and a bit overwhelming to me. If it's a good deal, he'll most likely entertain it.

As a newbie, I can't tell if I'm just overwhelmed with being in a new industry, or in fact, I don't believe in his strategy and would rather niche down.

In your opinion, is it better to specialize, or is it better to be a generalist and make money with several different real estate investment types?

As a newbie, I can't tell if I'm just overwhelmed with being in a new industry, or in fact, I don't believe in his strategy and would rather niche down.

In your opinion, is it better to specialize, or is it better to be a generalist and make money with several different real estate investment types?

Joe Villeneuve · Answer

In REI, the word "specializes" equates to another word, "restricting".  There are many, many ways to invest in RE.  Why would you restrict yourself?  Your Mentor isn't scattered...he's diversified in his knowledge, which means he can take advantage of a variety of opportunities, and isn't restricted to a niche that may not be available.

Those that are, have a tendency to accept less, just to get the property.  Your goal should be getting the deal.  There's a huger difference between the two...and I bet your Mentor knows this, and acts accordingly.

Adam Johnson · Answer

I will chime in on the common sentiment here - I think it is better to find what you are good at and run with it.  When I started investing, I was highly focussed on fix and flip single family homes.  Turns out, I was pretty terrible at it.  During the same start-up period, I also happened to buy a couple multi-family fix and hold properties in the same are.  At the beginning, I swore up and down I didn't want to be a landlord.  It turns out I was pretty good at that and more successful.  Over the first few years, I developed the "profile" of my style - I buy distressed multi-unit properties, fix the problems, and hold them long term.  I started out 12 years ago (wish I had started sooner) and that has worked for me.  I used to buy only 2-4 family.  That evolved into a preference for 4+ units, then evolved further into a mobile home park and more recently mixed use properties.

My thought on your situation is that you are overwhelmed trying to emulate your mentor, who has also very likely evolved through his own experiences.  You will do far better to focus in the beginning, and analyze the results.  If you are consistently doing well with a particular type of investment (or location, or whatever is common among successful deals), keep doing those types of deals.  If you flop on a deal, look at why and try not to repeat it.  Not repeating it could come in the form of learning from a mistake, or by staying away from a particular kind of deal that doesn't work well for you.

Over time, you will add to your education and experience and will probably branch out into more diverse investments.  In the beginning, however, it is critical to be focused on your education and deal-making.  Some of my "best" deals ended up in a garbage can because I didn't know what I was doing and was either forced out of the deal or couldn't put the money together.  The latter was the result of much more experienced investors looking at the deal, looking at me, and simply saying no way.  Looking back, it is likely that more than one of those deals could have wiped me out.

Through the experience I have gained, I have found myself to be a patient hunter.  I run other businesses too, so I can't always devote as much time as I'd like to my investment growth.   However, I will sit and wait in the weeds for quite a while to wait for the trophy to walk into my scope rather than simply taking shots at everything that moves.  That's my style.  Other investor friends seem like they are taking down a new deal all the time, that's their style.  Develop your own and you will do well.

Caleb Heimsoth · Answer

@Mike Kehoe. If you’re completely new to REI, I recommend picking a strategy and focusing on that to start.  That’s what I did with buy and hold rentals.  After you do a few transactions or become comfortable, then branch out. If you do it all at once you’ll likely not master anything and get overwhelmed.

Cory Carlson · Answer

The riches are in the niches. When starting out i would recommend focusing your energy on a couple strategies and getting comfortable with them. If you were an investor looking to reinvest your equity into a larger property, would you go to the investment GUY who has experience doing this or the guys website that shows he spends more time helping people buy homes rather than investments?

I would go to the investment guy.

Does not always pencil to be the jack of all trades and master of none. If you are going to add value to your clients, generalists have a hard time quantifying there added value.

Frank Wong · Answer

Hi Mike,

I like picking one and mastering and dominating in that one strategy. Example of myself. I have a specified target market, with a specific price range, I buy add-value SFR rentals. That's all I invest in.

Bruce Lee said it best "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times".

Pat L. · Answer

we found our 'niche' decades ago...& just focus on it.

Adam Johnson · Answer

You bet, no problem.

Mike Kehoe · Answer

Thanks for sharing your personal story. Very helpful!

Is it best to niche down, or be a generalist?

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