Vetting Alternative Investments

[Randy Smith]

If you’ve decided that you want to shift some of your capital out of the stock market rollercoaster to take advantage of the many benefits of investing in real estate, it’s time to put on your investigator hat and dig in. In this article, I’ll outline the four areas you’ll want to investigate before moving forward with your investment.

• Asset Class - There are as many options in real estate asset classes as there are ticker symbols in the stock market, so it’s important to identify an asset class that historical has provided the type of returns you are hoping to get with your next investment. Some of the most common asset classes in this space are apartment buildings, single family rentals, short term rentals, industrial, retail, office, self-storage, and mobile homes. If you can buy it, it’s possible to invest in it.

• · Market - As Robert Helms from the Real Estate Guys Radio Podcast says, “Live where you want, and invest where the numbers make sense.” It’s important to invest in a good market that has excellent economic dynamics. A great property in a bad market will likely be a bad investment over time.

• Operator - My analogy about “betting on the jockey” is likely getting old if you’ve been reading all my articles, but I believe the jockey is the most important factor to consider when choosing an investment. A good operator can make a bad deal go great, and a bad operator can make a good deal go bad. Choose your jockey wisely!

• · The Deal - Good deals exist in almost all markets and all asset classes, but it’s critically important to understand the specifics of the deal you invest with. It’s easy to get stuck in the minutia of the details, so it’s extremely important to have clear criteria on what you are looking for to help sort through all the options available.

We’ll dig into each of these areas in more detail in future articles, but this overview will give you a good idea of where you’ll need to spend your energy. If you can improve your comfort level in researching and identifying your preferences in these areas, you will be well on your way to choosing an amazing investment.