Getting the itch to get back into the game, which direction?

[Tom Makinen]

I had rental properties before, it wasn't very successful and I sold everything.  Fast forward to now, probably the worst time to buy investment property.  I understand that, but for some reason I still have an itch to get 2-3 just to hold.  I am not looking to get rich off of them, but I do need to diversify as I have 95% of my assets in stocks.  The other day when Donald spoke, I saw a nasty 12% drop in my portfolio.  I think it is time to diversify a little more when I see something.  I have the money to get on something if I see it, but then I could also sit if I have to as I have other investments that make pretty good returns.

Anyway I am a conservative to middle of the road investor, I just want to move my stock holding from 95% to 75% as I still prefer stocks over equity.  Here is my question for you guys.  I can think of several strategies, what is your thought on it?

#1  Invest in an older duplex in places like Buffalo, Indiana where they are dirt cheap, but have to deal with the potential crash in economy, repair due to the age of the homes, but these would generate positive cash to start with

#1b  Maybe spend more to move to markets like Vegas, Bakersfield, Fresno where there are still money, but I have to put up more to start.

#2   Get a small commercial medical office or something, I can get one that will generate positive cash flow for 3-5 years, but it's scary to think about what can happen after.  Big risk for less work short term

#3  Go big and get a one bedroom or studio in hot cities like Seattle, Denver, Austin, NYC, Boston.  It will be bloody expensive and dangerous.

#3b Get a small old home in those hot cities, it will be even more expensive but it doesn't have HOA

#4 Find a city where a SFH makes sense, ideally avoid the condos unless I see something that makes sense. The drawback would be vacancy obviously.

Thanks for the time

BTW I do have some real estate holding on the side via REITs and some crowdfunding stuff.  They probably have just as good of a return as any properties I will be able to buy.  

[Steve Rozenberg]

@Tom Makinen

I think that the best thing you can do is focus on the end goal of why you are investing. Then once you know the end of the rainbow type goal and can put some numbers to that. Then you work it backwards and you create the strategy to match and get you to the goal. Once you know specifically what that looks like then you find the area that can help you achieve that strategy. Start at the end and work it backwards.

We manage about 1,000 homes in Texas and most of our owners are out of state and out of country. The biggest thing I tell them before they ask me to help them find and buy a property and then manage it is they need to know what they are looking for first and what is a good deal based on their goals before I can help them find that good deal. If they dont know then I will never be able to find it and it will waste a lot of peoples time running around at everything that looks like a deal. And just because it cashflows or has equity does not mean it is a good deal for you based on your specific goals in life.

Buying a property in a certain location is the same as trying to buy a stock in a certain location. You buy a stock based on numbers and dividends... same is true with real estate. You should buy it based on numbers and returns that match your strategy. Not based on an area. 

I know all this because I did this all exactly opposite and bought a bunch of bad investment properties at first. Mainly because I did not know what a good deal was and was not based on my goals, because I never created them.

Best advice I can give no matter where you buy, is focus on the goal and end result and then create the strategy. It will or should make your investing career much more successful if you know your "Why" before you focus on your "How"