Stop Chasing Every Deal: Why Successful Investors Pick a Niche
How to choose your asset class, geography, and strategy—and why focus beats FOMO
Here's an uncomfortable truth: most beginning real estate investors fail because they chase every shiny opportunity instead of focusing on one niche.
Yes, there will be times to veer from your niche temporarily or even pivot entirely, but keeping focus will yield the best results in the long run.
Successful investing in real estate requires building expertise. Expertise is MUCH easier to build if you focus on a specific niche.
Why is this true?
Why not just look at a whole variety of opportunities and pick the ones with the best risk adjusted returns for you?
The answer: developing expertise takes focused repetition. Focused repetition is only possible if you pick a niche.
Let me explain.
What is a Niche?
In reference to real estate investing, let’s define a “niche” as a combination of (a) how you are going to invest and (b) what you are going to invest in.
The “how” was discussed in detail in 5 Ways to Invest in Real Estate (From $60 to All-In). Here is a quick recap of the ways, from least time consuming to most time consuming:
Owning shares of a REIT.
Investing as a limited partner (LP).
Buying a property by yourself.
Buying a property with someone as equal partners.
Buying a property as the general partner and raising money from LPs.
The “what” is new to our discussion. It is made up of three components.
Asset Class: 1-4 unit residential, apartments, office, industrial, retail.
Geography: where you plan to invest.
Strategy: core/turnkey, light rehab, value add (or fix and flip), house hacking.
When you combine these combinations, there are literally 100’s of niches to choose from.
It may seem overwhelming.
Help!!!!
Don’t worry.
As with any big issue, the key is to break it down into parts.
For this discussion, let’s assume the “how” of your niche will be to buy the property by yourself. This will allow us to focus on the “what”. Even if you decide to invest with a partner (or raise money) or invest as an LP, the same principles will apply in thinking about the “what”.
Asset Class
Choosing an asset class is probably the most foundational decision you need to make. I discussed asset classes in detail in Asset Classes Explained: Industrial, Office, Retail, Multifamily, and 1-4 Unit Residential. Here’s a short recap:
Industrial: Simple to operate, low ongoing capital needs, good cash flow.
Office: Complicated to operate, high ongoing capital needs, challenging cash flow.
Retail: Reasonable to operate, moderate ongoing capital needs, good cash flow.
Multifamily/Apartments: Intensive to operate, varied ongoing capital needs, good cash flow.
1-4 Unit Residential: Easier than apartments to operate, varied ongoing capital needs, good but lumpy cash flow due to the limited number of tenants.
If you are just starting out and have more limited funds, the most accessible asset classes will be:
1-4 unit residential.
A small industrial property.
A small single-tenant retail property.
The reason to pick one asset class is because each type has its own nuances and characteristics. If you jump from type to type, you will never develop any expertise. Without expertise you will miss opportunities and misjudge risk.
Geography
Geography is just as it sounds: where are you going to invest? Think of it in terms of:
Region: example coastal markets or the sunbelt states or the midwest.
Markets: a specific area within a region. Example: Charlotte, NC.
Submarket: this gets even more specific. What micro areas do you like in your market?
You don’t have to start with a submarket specifically. For example, maybe you have $30,000 to invest. You are limited to lower cost markets and can’t afford coastal areas.
You might pick the midwest U.S. as your region and then focus on Detroit over time. As you learn more about Detroit, you could then pick the submarkets you like.
Remember, you don’t have to limit yourself to the market you live in. You can find a good broker and property manager in another market who will do all the work for you while you direct the overall strategy. See You Don’t Have to Do Everything Yourself: Building Your Real Estate Team.
It is OK to have multiple geographies to focus on. It just means more areas to keep up with. I recommend starting with one. Or doing some research on two to three with the goal of ultimately focusing on one.
Strategy
Strategy is the approach you are going to take to operating your property. We will explore this in detail next week. For now let’s start with the following options:
Core/Turnkey: low risk, low return. You buy a property that is well leased and maintained. There is minimal work to do.
Light Rehab: medium risk, medium return. There is some work to do, but it is mainly cosmetic (paint, carpet, clean up). If you do the work, you can increase the rent and value of the property.
Value Add: high risk, high return. There is a lot of work to do. The property might even be vacant. You will be repositioning it and taking on a lot of risk for superior returns. You will either find a tenant once the work is complete or sell it (fix and flip).
House Hacking: this option only applies to 1-4 residential. You will live in one unit (or room) of the property and rent out the other units (or rooms), allowing you to live rent free or at a reduced cost.
Each strategy has its own pros and cons. There is no right answer.
You can see that choosing the right one for you depends on the time you have and your tolerance for risk.
Now let's see how this works in practice. Here are four real-world niche examples that combine these elements differently.
Creating Your Niche: Putting It All Together
Option 1: Good for a W-2 employee with no spare time who wants passive income.
Asset Class: Retail
Geography: Pacific Northwest
Strategy: Turnkey
You decide to buy single tenant leased fast food buildings that are leased long-term (ex. 10+ years). The tenants are responsible for maintaining the buildings so there is very little work for you to do. You have always liked the Pacific Northwest because you grew up there and saw businesses like Amazon, Costco, and Microsoft drive the economy.
Option 2: Good for a W-2 employee with limited time who wants passive income.
Asset Class: 1-4 Unit Residential
Geography: Southeast U.S.
Strategy: Turnkey
You don’t have a ton of free time, so you want to buy turnkey assets that don’t need a lot of work. You live in a more expensive coastal market, but can’t afford to buy there so you find a good broker and property manager who will find and manage your future out-of-state properties that will be in a more affordable market in the southeast. You are starting with a one or two unit residential property because that is all you can afford. Over time, you hope to assemble a collection of duplexes and four-plexes.
Option 3: Good for someone with time to be more active in managing their investment.
Asset Class: Industrial
Geography: San Antonio, TX
Strategy: Light Rehab
You like the simplicity of industrial. You are targeting an older, well located building that needs to be repositioned with some paint and new signage. You like San Antonio because it is near the fast growing market of Austin.
Option 4: Good for someone ready to give their evenings and weekends to fixing up the property.
Asset Class: 4 Unit Residential
Geography: Los Angeles, CA
Strategy: Value Add
You have lived in LA all your life and have seen that there is never enough housing. You have researched the rent control laws of California and understand how to navigate them. You scrape together all the money you have to buy a 50+ year old four-plex in West Los Angeles that needs a major rehab. You plan to hold this property forever and pass it on to your children.
Why Having a Niche Matters
As you can see, these four options are very different strategies.
Finding a property to invest in takes work. You will likely have to look at 10-100+ potential properties before you find one to buy.
It is through this repetition that you start to (a) learn more about your niche and (b) see the one or two properties that are a better deal than the others.
Without this level of focus and repetition, you are like an athlete playing many different sports. You may be adequate at each, but you will never develop expertise.
The most successful investors focus and become experts in their niche. If they have multiple niches it is because they mastered the first and expanded into additional niches.
How to Choose Your Niche: A Simple Framework
Ask yourself three questions:
Money: How much capital do I have to invest? (This limits your asset class and geography options)
Time: How much ongoing time can I dedicate? (This determines your strategy)
Interest: What excites me? (You are more likely to stick with what you find interesting)
Closing Thoughts
There are at least two ways to look at the concept of having a niche.
Feeling Constrained
Feeling a Sense of Freedom
Some will feel constrained. They are the type who have FOMO, feeling there are always better opportunities that they are missing out on. They hear of someone making a successful investment outside of their niche. They decide to pivot. 18 months and five pivots later, they have either failed to make an investment or worse, made an impulsive investment decision that may or may not work out.
Distraction is the enemy of progress.
I encourage you to view it from the other perspective, as freedom. By focusing on a niche you will have freedom.
Freedom to develop expertise.
Freedom to focus.
Freedom to ignore temptations outside of your niche.
Once you build expertise and momentum in your niche, you can expand and add to it.
I didn’t start with expertise in multiple asset classes, markets, and strategies. I developed and grew expertise over my 20+ year career in real estate and being an investor.
But ask me about a market I don’t have any experience in (ex. Miami or New Jersey) and I will acknowledge I don’t know much.
This is fine. Humility is a good thing.
What you don’t want to do is be an investor who makes bets without doing the research or having focus. You won’t be an expert on your first deal, but you will build momentum over time if you stick to a niche.
My Niche Evolution
Here’s how it evolved for me over the past 23 years of investing.
Stage I - No Niche: I made an LP investment in a hotel in Los Angeles without any investment focus. I made this investment because the GP was (and still is) my friend. Luckily, it worked out.
Stage II - Western U.S., Value Add, Industrial: For the 20 years I was at Westcore, we primarily focused on this niche. Yes we did some retail and office deals, but we were primarily focused on industrial. After 20 years we actively expanded our geography to Texas and further east while maintaining a focus on value add industrial.
Stage III - Western U.S., Value Add, Multifamily as an LP: In 2015, I started making LP investments with a multifamily GP. I actively pursued this focus to build up passive income and diversify outside of industrial. I even spent two years working for the GP and learned the operational side of the multifamily business.
In stage I, I was clueless. I was lucky to invest with a GP who was very capable and honest.
My time at Westcore (stage II) allowed me to develop real expertise in a niche.
It was only after 10+ years at Westcore that I added an additional niche as a multifamily LP investor (stage III). The expansion came after mastering the previous niche - not before.
Today, my personal investment portfolio is still industrial and multifamily with strategies I understand and in markets I know well. These are my niches. What happens when I see an office deal? I am a quick no.
Focus doesn’t mean you never change. It means you build expertise before expanding your focus.
Do you have a story you want to share of sticking to a niche or veering outside of it? Email me at bateman@creprofessor.org. I read every email and would enjoy hearing your story.
Professor BatemanHere's an uncomfortable truth: most beginning real estate investors fail because they chase every shiny opportunity instead of focusing on one niche.
Yes, there will be times to veer from your niche temporarily or even pivot entirely, but keeping focus will yield the best results in the long run.
Successful investing in real estate requires building expertise. Expertise is MUCH easier to build if you focus on a specific niche.
Why is this true?
Why not just look at a whole variety of opportunities and pick the ones with the best risk adjusted returns for you?
The answer: developing expertise takes focused repetition. Focused repetition is only possible if you pick a niche.
Let me explain.
What is a Niche?
In reference to real estate investing, let’s define a “niche” as a combination of (a) how you are going to invest and (b) what you are going to invest in.
The “how” was discussed in detail in 5 Ways to Invest in Real Estate (From $60 to All-In). Here is a quick recap of the ways, from least time consuming to most time consuming:
Owning shares of a REIT.
Investing as a limited partner (LP).
Buying a property by yourself.
Buying a property with someone as equal partners.
Buying a property as the general partner and raising money from LPs.
The “what” is new to our discussion. It is made up of three components.
Asset Class: 1-4 unit residential, apartments, office, industrial, retail.
Geography: where you plan to invest.
Strategy: core/turnkey, light rehab, value add (or fix and flip), house hacking.
When you combine these combinations, there are literally 100’s of niches to choose from.
It may seem overwhelming.
Help!!!!
Don’t worry.
As with any big issue, the key is to break it down into parts.
For this discussion, let’s assume the “how” of your niche will be to buy the property by yourself. This will allow us to focus on the “what”. Even if you decide to invest with a partner (or raise money) or invest as an LP, the same principles will apply in thinking about the “what”.
Asset Class
Choosing an asset class is probably the most foundational decision you need to make. I discussed asset classes in detail in Asset Classes Explained: Industrial, Office, Retail, Multifamily, and 1-4 Unit Residential. Here’s a short recap:
Industrial: Simple to operate, low ongoing capital needs, good cash flow.
Office: Complicated to operate, high ongoing capital needs, challenging cash flow.
Retail: Reasonable to operate, moderate ongoing capital needs, good cash flow.
Multifamily/Apartments: Intensive to operate, varied ongoing capital needs, good cash flow.
1-4 Unit Residential: Easier than apartments to operate, varied ongoing capital needs, good but lumpy cash flow due to the limited number of tenants.
If you are just starting out and have more limited funds, the most accessible asset classes will be:
1-4 unit residential.
A small industrial property.
A small single-tenant retail property.
The reason to pick one asset class is because each type has its own nuances and characteristics. If you jump from type to type, you will never develop any expertise. Without expertise you will miss opportunities and misjudge risk.
Geography
Geography is just as it sounds: where are you going to invest? Think of it in terms of:
Region: example coastal markets or the sunbelt states or the midwest.
Markets: a specific area within a region. Example: Charlotte, NC.
Submarket: this gets even more specific. What micro areas do you like in your market?
You don’t have to start with a submarket specifically. For example, maybe you have $30,000 to invest. You are limited to lower cost markets and can’t afford coastal areas.
You might pick the midwest U.S. as your region and then focus on Detroit over time. As you learn more about Detroit, you could then pick the submarkets you like.
Remember, you don’t have to limit yourself to the market you live in. You can find a good broker and property manager in another market who will do all the work for you while you direct the overall strategy. See You Don’t Have to Do Everything Yourself: Building Your Real Estate Team.
It is OK to have multiple geographies to focus on. It just means more areas to keep up with. I recommend starting with one. Or doing some research on two to three with the goal of ultimately focusing on one.
Strategy
Strategy is the approach you are going to take to operating your property. We will explore this in detail next week. For now let’s start with the following options:
Core/Turnkey: low risk, low return. You buy a property that is well leased and maintained. There is minimal work to do.
Light Rehab: medium risk, medium return. There is some work to do, but it is mainly cosmetic (paint, carpet, clean up). If you do the work, you can increase the rent and value of the property.
Value Add: high risk, high return. There is a lot of work to do. The property might even be vacant. You will be repositioning it and taking on a lot of risk for superior returns. You will either find a tenant once the work is complete or sell it (fix and flip).
House Hacking: this option only applies to 1-4 residential. You will live in one unit (or room) of the property and rent out the other units (or rooms), allowing you to live rent free or at a reduced cost.
Each strategy has its own pros and cons. There is no right answer.
You can see that choosing the right one for you depends on the time you have and your tolerance for risk.
Now let's see how this works in practice. Here are four real-world niche examples that combine these elements differently.
Creating Your Niche: Putting It All Together
Option 1: Good for a W-2 employee with no spare time who wants passive income.
Asset Class: Retail
Geography: Pacific Northwest
Strategy: Turnkey
You decide to buy single tenant leased fast food buildings that are leased long-term (ex. 10+ years). The tenants are responsible for maintaining the buildings so there is very little work for you to do. You have always liked the Pacific Northwest because you grew up there and saw businesses like Amazon, Costco, and Microsoft drive the economy.
Option 2: Good for a W-2 employee with limited time who wants passive income.
Asset Class: 1-4 Unit Residential
Geography: Southeast U.S.
Strategy: Turnkey
You don’t have a ton of free time, so you want to buy turnkey assets that don’t need a lot of work. You live in a more expensive coastal market, but can’t afford to buy there so you find a good broker and property manager who will find and manage your future out-of-state properties that will be in a more affordable market in the southeast. You are starting with a one or two unit residential property because that is all you can afford. Over time, you hope to assemble a collection of duplexes and four-plexes.
Option 3: Good for someone with time to be more active in managing their investment.
Asset Class: Industrial
Geography: San Antonio, TX
Strategy: Light Rehab
You like the simplicity of industrial. You are targeting an older, well located building that needs to be repositioned with some paint and new signage. You like San Antonio because it is near the fast growing market of Austin.
Option 4: Good for someone ready to give their evenings and weekends to fixing up the property.
Asset Class: 4 Unit Residential
Geography: Los Angeles, CA
Strategy: Value Add
You have lived in LA all your life and have seen that there is never enough housing. You have researched the rent control laws of California and understand how to navigate them. You scrape together all the money you have to buy a 50+ year old four-plex in West Los Angeles that needs a major rehab. You plan to hold this property forever and pass it on to your children.
Why Having a Niche Matters
As you can see, these four options are very different strategies.
Finding a property to invest in takes work. You will likely have to look at 10-100+ potential properties before you find one to buy.
It is through this repetition that you start to (a) learn more about your niche and (b) see the one or two properties that are a better deal than the others.
Without this level of focus and repetition, you are like an athlete playing many different sports. You may be adequate at each, but you will never develop expertise.
The most successful investors focus and become experts in their niche. If they have multiple niches it is because they mastered the first and expanded into additional niches.
How to Choose Your Niche: A Simple Framework
Ask yourself three questions:
Money: How much capital do I have to invest? (This limits your asset class and geography options)
Time: How much ongoing time can I dedicate? (This determines your strategy)
Interest: What excites me? (You are more likely to stick with what you find interesting)
Closing Thoughts
There are at least two ways to look at the concept of having a niche.
Feeling Constrained
Feeling a Sense of Freedom
Some will feel constrained. They are the type who have FOMO, feeling there are always better opportunities that they are missing out on. They hear of someone making a successful investment outside of their niche. They decide to pivot. 18 months and five pivots later, they have either failed to make an investment or worse, made an impulsive investment decision that may or may not work out.
Distraction is the enemy of progress.
I encourage you to view it from the other perspective, as freedom. By focusing on a niche you will have freedom.
Freedom to develop expertise.
Freedom to focus.
Freedom to ignore temptations outside of your niche.
Once you build expertise and momentum in your niche, you can expand and add to it.
I didn’t start with expertise in multiple asset classes, markets, and strategies. I developed and grew expertise over my 20+ year career in real estate and being an investor.
But ask me about a market I don’t have any experience in (ex. Miami or New Jersey) and I will acknowledge I don’t know much.
This is fine. Humility is a good thing.
What you don’t want to do is be an investor who makes bets without doing the research or having focus. You won’t be an expert on your first deal, but you will build momentum over time if you stick to a niche.
My Niche Evolution
Here’s how it evolved for me over the past 23 years of investing.
Stage I - No Niche: I made an LP investment in a hotel in Los Angeles without any investment focus. I made this investment because the GP was (and still is) my friend. Luckily, it worked out.
Stage II - Western U.S., Value Add, Industrial: For the 20 years I was at Westcore, we primarily focused on this niche. Yes we did some retail and office deals, but we were primarily focused on industrial. After 20 years we actively expanded our geography to Texas and further east while maintaining a focus on value add industrial.
Stage III - Western U.S., Value Add, Multifamily as an LP: In 2015, I started making LP investments with a multifamily GP. I actively pursued this focus to build up passive income and diversify outside of industrial. I even spent two years working for the GP and learned the operational side of the multifamily business.
In stage I, I was clueless. I was lucky to invest with a GP who was very capable and honest.
My time at Westcore (stage II) allowed me to develop real expertise in a niche.
It was only after 10+ years at Westcore that I added an additional niche as a multifamily LP investor (stage III). The expansion came after mastering the previous niche - not before.
Today, my personal investment portfolio is still industrial and multifamily with strategies I understand and in markets I know well. These are my niches. What happens when I see an office deal? I am a quick no.
Focus doesn’t mean you never change. It means you build expertise before expanding your focus.
Do you have a story you want to share of sticking to a niche or veering outside of it? Email me at bateman@creprofessor.org. I read every email and would enjoy hearing your story.
Professor Bateman