What Kind Of Investor Are You?

Posted by Alan Zunec on Wednesday, August 6th, 2014 at 12:47pm.

Ever wonder what kind of investment you should be doing? You have come to the right place. The local area can be used as a great property investment tool. But most people are not sure of what kind of investment to buy. Long term hold, short term hold, short sale, fix and flip (rehab) or even a long term flip.

In many business books and websites there is usually talk of the golden circle. It is a circle that looks like this.

Now what this circle means is pretty simple. In business you can only choose 2 of the 3. So say you want a product that is fast and good, it will not be cheap. Now you want one that is cheap and fast, so it will not be good, etc. One example of this is buying something from a dollar store. We all know the quality is never good but it is fast (get in and out) and it is cheap. You have to sacratice one to get the other two.

Now we can also do this with real estate investing. But instead of cheap, fast, good. We can do quick, safe and abundant. I will explain each in turn.

Quick – You want fast money. You do not have a lot of time to spare. Making money quickly is key.
Safe – Your risk tolerance is low. So you want a safe investment.
Abundant – You want a lot of money. Not just a 1% or 2% but you want to make a good chunck of cash.

So now that you know about the golden circle. Use the tool below to see what kind of investor you are.

The Lingo – Summary Of Terms Investors Use

Flipping, also known as rehabbing – taking a run down home and cleaning, fixing and polishing it up to sell quickly and for a profit

Buy and Hold – exactly as it says. Buy real estate, rent it and in the long term sell for a large profit

Cash flow – when your passive income exceeds your expenses. Example: Your tenants pay $1500 a month but your total expenses on the property are $1000 a month. You are cash flowing $500 a month

R.O.I. – Return on Investment. The equation looks like this. ((invested amount – profit)/invested amount) * 100

Vendor buy back – When a seller loans you money back at a percentage rate

Asset – An item of economic value

Liability -An obligation to settle a debt. Something that DOES NOT make you money. Instead it takes your money

Mortgage – A loan to buy real estate

Debt Service – Monies that need to be paid for interest and principle. In Real Estate investing this is taking a monthly loss to buy that property that will pay much more over the long term

Lease Option – Lease a home with the option to purchase. In essence this is "rent to own".

Leave a Comment