The PIG Method of Real Estate Investing [updated for 2018]

When you read the title, you probably thought I was talking about a sloppy way of investing in Real Estate, didn’t you?

I don’t blame you, the word PIG can depict a lot of things.

Generally, we get some visual of an animal playing in the mud and rolling around.

But – in this case, PIG stands for a totally different meaning.

What is the P.I.G Method?

P.I.G stands for Personal Investment Goals.

When it comes to Real Estate Investing, people have a tendency of imagining so many ways of putting money into so many different types of properties and so on so forth.

Unfortunately, for most, when it comes to actually put the money to work, they are very clueless on what steps to take in order to mitigate risk at the highest level. And, when things don’t go so well, they are left speechless due to so many inconsistencies with what they had imagined in the first place.

I mean, think about it…

At first, they probably pictured a whole ideal scenario where they would walk into a property, renovate it to the highest degree and flip it for massive profits.

However, when things didn’t work, it not only shot down their ambitions of succeeding but it also left them with a sour taste in their mouths.

This is exactly why people need to go through the P.I.G Method when it comes to Real Estate Investing

Let’s go over what it consists of and what key roles each component plays:

1 – By defining your Objectives, you work with more Clarity and Surety

Real Estate is not as easy as it sounds. You need to clearly define your objectives and for what reasons you are investing your hard-earned money.

Defining your objectives really boils down to exactly what you wish to accomplish. These can be both short and long-term goals.

For instance, are you looking for cash flow today? This will provide you with an immediate benefit of having some liquidity on a regular basis.

Also – are you looking for long-term equity? In most cases where you are holding a property and waiting for it to appreciate, it can take anywhere between 5 to 10 years. You’ll need to determine if it’s something that you’re willing to do and if it’s something that you will have the time and patience for.

Be sure to be very realistic with your expectations when it comes to identifying your personal investment goals and your objectives.

2 – Mitigate the majority of the Risks upfront

Risks happen and that is something that we can’t get away from. This means that you need to identify exactly what types of risks you are willing to take.

Take into consideration the idea of playing the role of an aggressive investor, where if you win, you have the opportunity to walk away with a big payday. On another note, with that same context, if you were to lose, you would essentially walk away with nothing, or even possibly a loss.

Write down your risks and evaluate what you’re comfortable with.

On the contrary of an aggressive investor, you may also explore the idea of being conservative. This will help allow you to be marginal when it comes to how much you make or how much you lose. Yes, it’s possible that you also give up a large number of opportunities, but the end result is that you are looking to grow in a stable and predictable manner.

3 – Understanding Exactly what Properties You Want Helps Tremendously

Investing in Real Estate can happen through many different strategies and many different properties. Figuring out what you want in terms of an exact “type” of property can help alleviate some of the stress.

Here’s why it’s important to identify what exactly you want prior to investing a single dollar:

  • It will help you stay focused on a single niche
  • Allows you to grow over time by giving you experience
  • Gives you the chance to really learn about that exact type of property
  • Build a portfolio of those types of properties as you become more and more familiar with that niche
  • Other investors may look to you for advice and you can joint-venture with them, given that you have established a good track record in that niche based on those “specific” properties

The above-referenced points are just the tip of the iceberg.

Of course, you want to make sure that you focus heavily at the beginning on those types of properties and that you allow yourself to immerse in the experience of becoming familiar with everything and anything that deals with that niche category of properties.

Remember, building experience takes time, so you need to focus at first on becoming more educated and learning from your mistakes as you make them.

4 – Figure out What Markets and Demographics you want to Invest In

This is probably something that you need to do very carefully. The reason why it’s important to figure out your market is that you don’t want to be stuck with a lot of stress and uncertainty when it comes to you having invested your hard-earned dollars into a property in a market that you have no clue about.

A lot of Real Estate Investors go through significant stress when they feel that they either underestimated the work that will need to be put in or the fact that they overestimated what can be achieved based on specific demographic.

Do you want to invest in an area that is not close to home? Will you be able to travel frequently while being able to maintain control and steady growth?

These are just some of the questions that you need to be asking yourself.

You also want to consider whether or not you want to target specific demographics when it comes to investing. For example, do you want to go into low-income housing, as it depicts a certain “higher” yield in comparison to other types of high-end properties?

With low-end properties, please do not discount the stress that comes with it. Will you be able to handle those types of stresses? Are you able to actively keep up with difficult tenants and can you put up with the idea of regularly replacing these tenants?

Again, focus on what will best fit your personality and “inner investor.” You don’t want to get into a market where you have no control and are stuck with more problems than benefits.

Alternatively, you can always invest in high-end properties where the yield is low to moderate, yet the consistency of tenants and quality are somethings that are considered a high priority.

Whatever it is that you chose, you want to be sure of what markets you want to target. Especially when it comes to your personal involvement along with the money that you invest.

In Conclusion:

The P.I.G Method is a really good way of identifying your Inner Investor prior to starting in the game of Real Estate. Not only does it help you create a blueprint and a clear map of what you need to do, but it also gives you confidence in terms of which direction you want to take.

Remember, Real Estate Investing is a long-term game. You will learn the ropes, go through a few bumps, but eventually, you’ll succeed if you stick to a solid plan and work within your comforts based on your Personal Investment Goals.

 

Leave a Reply