With the World Series under way, it has inspired us to break out some baseball references. All of the talk surrounding hitting, pitching and defense has a direct correlation to real estate investing. As an investor, one of the first things you need to evaluate is what kind of hitter you want to be. Do you want to be the type that looks for singles or are you more of a power hitter looking to hit a home run? Both strategies have proven they can work in the real estate industry, but both come with inherit risks and obstacles.
An investor with “singles” in mind is simply looking for small profits on multiple deals throughout the course of their career. They are ultimately content with small profits on their deals, as long as they have several more lined up. Accordingly, they need to close multiple deals to make the same as the home run hitter who closes only a few deals a year. This would appear to be a safer strategy, but finding these deals can prove to be a problem. If they are content with this method, they may miss out on more lucrative deals that come their way.
As their name suggests, the home run hitter swings for the fences on every deal. When they connect, they want it to be for a substantial profit. They are not going to waste their time with anything less than five figure potential. They frequently and willingly pass over smaller deals that may be quicker to close, but don’t carry as much potential profit. This strategy comes with increased risk, but they figure the handful of home runs a year they close will make it worth it.
Both approaches have risks and rewards. Both have also proven that they can work for the right investor. The key is to know who you are and accept it. Once the singles hitter starts to look for bigger deals, they will miss deals that are in their wheelhouse and comfort zone. Since they are reliant on volume, even a few missed deals will cause them to make less than desired.
The same methodology applies to the home run hitter. Once they start looking for smaller deals, they will get bored or frustrated with how long they have to work to make a small profit. Sooner or later they will roll the dice on a deal that they shouldn’t. If they had just stuck with the approach that they know and enjoy, they wouldn’t have to play catch up. They can accept striking out on deals they have found, but once they start speculating and trying for even riskier deals, they get into trouble.
Many teams, like investors, have been successful with different strategies. One of the beauties of investing is that you can practice your own style. The key is to stick with what you believe and go for it. It doesn’t matter what your strategy is, as long as you dedicate yourself to it.