Ask Brian: What Are My Competitive Investment Advantages in This Market?



Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to askbrian@realtybiznews.com.

Question. Carl from TX writes: Hi Brian. I’ve been investing in real estate for a little over 8 years. I received a heft inheritance about the time residential prices were seriously distressed. It gave me a competitive advantage because I had cash to invest when few others did. I bought several foreclosures, did some minimal repairs, and rented these out for several years. When the market got healthy again, I sold for a very good profit. I might be boosting but I think I did very well. Now that I have experience, I want to continue investing and profiting from real estate. However, I no longer have the competitive advantage of having cash when few others do (there’s plenty of cash in the market). I’m looking for a new competitive advantage. Any ideas?

Answer. Hello Carl. Realizing the high value a competitive advantage brings to your investment business is your number one advantage. Of course, not knowing your situation, it’s impossible to provide specific ideas. There are always the general rules about real estate investing. Two of the more important are always having an exit strategy before you buy and always having a purchase price cap for a property that you never exceed. With that said, cash is still king in the real estate market. Carl, it sounds like you are sitting on a pile of cash. That is still a big competitive advantage. What you really need is a strategy to best leverage your cash.

Something you didn’t mention is if you invest full time job or if it’s a sideline. If you have the time, your competitive strategy could be to dominate a single small market (big fish in a small pond). Do your research to find a decent size neighborhood with a good upside for the next several years. In the residential market, this is usually a low to middle income market. Although you could try specializing in an upscale neighborhood, the lower end is less risky. The lower end has a much larger volume of renters, first time buyers, and families moving up to their second home purchase.

Once you decide on a neighborhood, learn how much competition you’ll being facing and what their competitive advantages are. Learn everything there is about the neighborhood. You need that knowledge to decide if the competition is using the best strategy or if you can prevail with a better strategy. If you find the competition has the best strategy, you have to decide if you want to compete with them. Obviously, if you’ll be competing, you’ll need a superior business model that becomes your competitive advantage. If you find the competition isn’t using the best strategy, your better strategy becomes your competitive advantage.

Once you decide on a strategy, your next priority is robust marketing. You need to get your brand out there with a clear message about what you are offering. There are a ton of ways you can go about marketing but at the neighborhood level, bandit signs are a proven winner. Think of all the broker “For Sale” signs as one type of bandit sign. These are all over the place because they work. You need to formulate a short message about how you are offering something better than the others are. Post these everywhere in the neighborhood starting with high traffic intersections. But be sure you understand what the sign police allow and what might get you fined.

Everything considered, the best tool you can use is a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Google it to learn how powerful this tool is for giving you a competitive advantage. You want to identify your strengths so you that you can exploit them. Know your weaknesses to minimize and/or improve them. Opportunities often become your competitive advantage or you leverage opportunities using your advantage. Look for an opportunity in the market that isn’t being met. Threats are typically either the competition or regulations. A competitive threat could be if your competition can easily adopt your strategy to prevent it from remaining your advantage. Building codes, permits, and those types of things are regulatory threats.

Carl, that’s a simplified version of a SWOT analysis but you’ll find plenty of detailed information online. You’re definitely on the right track because a real estate investor with a competitive advantage has a higher success rate and a better-established market share.

I’m sure other readers want to hear your ideas for a competitive advantage. Please leave your comments. Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to askbrian@realtybiznews.com.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, near a national and the Pacific Ocean.