Choosing the right investment opportunity is somewhat like making any other major decision in your life. What is right for one person is not going to be right for everyone else. In order to find the right opportunity, there are some questions you need to ask yourself and decisions you need to make about what you want. Here are three questions to ask yourself to help you choose the right investments.
Hands on or hands off?
Some people want to be directly involved in managing their investments, while others just want to put up the money and be kept informed as to how their investment is performing. In today’s market, there are plenty of opportunities for both. If you are a do-it-yourself person, you may want to look at the single-family rental or “flipping” spaces. Bother have relatively low barriers to entry and are not overly complicated. If you are a “hands-off” sort, there are numerous passive investment opportunities as either a limited partner (LP) in a direct investment or real estate fund. Be aware that most of these will carry a minimum investment requirement.
High-risk or low-risk: Where do you live on the risk spectrum?
Some investors have a higher risk tolerance than others. If an investment is going to give you anxiety, it is probably not the right investment for you. High-risk investments generally come with higher rewards but also carry a higher risk of loss. In this as with all things, your investment portfolio can be diversified, but how much risk and how many investments of each type will depend on you.
Duration and Liquidity?
Some investments mature gradually over time, while others mature fairly quickly. Some real estate investments will allow you to receive income almost immediately, while some will take many years. Some will have a duration of as little as a few months, while some can take 10 years before you can access your money. Make sure to familiarize yourself with the liquidity of any investment before committing.
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