Do you want to make money in real estate? Of course, you do! Who doesn’t? In this blog post, we are going to discuss a few real estate investment strategies that should help you get started. Keep in mind that there is no one-size-fits-all answer when it comes to real estate investments.
Residential properties are a great way to invest your money. It’s a stable and reliable investment, and there are a variety of ways you can make money from it. You can buy and sell property, or rent it out to tenants.
The residential market is a great place to start your investing career. It’s relatively simple to understand, and there are a lot of resources available to help you get started.
What works for one person may not work for another. You need to find the real estate investment strategy that best suits your needs and your goals. With that said, let’s get started!
How Much Do You Need To Start Investing?
This is a difficult one to answer simply, it depends on a number of factors. Including the type of real estate you’re investing in, the location, and your own personal financial situation.
If you can’t afford a deposit, then you can still invest as little as $5 through crowd investing without owning real estate. Crowd investments are becoming more and more popular, by making small investments without the hassle of physical real estate. But be sure to do your research before investing.
There are a lot of scams out there, so make sure you’re working with a reputable company.
With the rising prices of home mortgages, it is more important than ever for individuals to invest in their own homes. If you cannot afford a second property but want your investment to grow faster than inflation – here’s how!
The tips below will help make sure that any money put into repairing or updating one house funds investments elsewhere too; so when all’s said and done there are even greater returns on what was originally invested (even if just by little).
Real Estate Investment Strategies By Property Type
Residential Real Estate
Are you looking to buy a property to live in or an investment property? If you are buying an investment property, will you be renting it out or selling it?
These are important questions to answer before you begin the process of investing in residential real estate. Once you have a clear idea of your goals and strategies, you can begin to research the different types of properties available and find the one that best suits your needs.
Commercial Real Estate
Investing in commercial real estate can be a great way to earn a steady income and build long-term wealth.
While there are many different types of commercial real estate, one of the most popular investments is apartment buildings. When done correctly, an investment portfolio of apartments can provide an investor with a stable stream of rental income and the potential for significant appreciation.
Additionally, these commercial buildings often have high occupancy rates, which can provide a buffer against vacancy risks.
For all these reasons, investing in commercial real estate, particularly in rental properties, can be a great way to build long-term wealth.
Industrial Real Estate
When it comes to real estate investing, there are a lot of options to choose from. However, one type of real estate that is often overlooked is industrial real estate.
Unlike residential or commercial real estate, industrial real estate generally refers to properties that are used for manufacturing distribution, or storage purposes.
Even though it may not be as sexy as other types of real estate investing. Industrial rental properties can be a great way to earn passive income and build wealth over time.
One of the biggest benefits of investing in industrial real estate is that there is always demand for these types of properties. No matter what the economy is doing, businesses still need somewhere to manufacture their products and store their inventory.
As a result, vacancy rates for industrial properties are usually quite low. This means that you can generate a steady stream of rental income from your investment.
Also, since these investment properties are typically located in industrial areas outside of major cities, they tend to be much cheaper than other types of real estate. This makes them an especially good option for investors who are just starting out.
Locations
Of course, like with any type of real estate investing, there are some risks involved in investing in industrial real estate. For example, if a business locates its manufacturing plant in a different area or decides to switch to a different storage system, your property could become vacant overnight.
However, by diversifying your portfolio and investing in multiple industrial properties in different areas, you can minimize this risk. Additionally, these properties are usually less expensive than other types of real estate. You can often buy them with cash or with a smaller down payment than you would need for other types of investment properties. This makes them a more accessible option for many investors.
If you’re thinking about adding real estate to your investment portfolio, don’t forget to consider industrial real estate. With its high potential for rental income and its relatively low cost, it can be a great way to earn passive income and build wealth over time.
Land Real Estate Investment
There are many different ways to invest in real estate, but one of the most popular strategies is to invest in land. Land investing can be a great way to diversify your portfolio and generate income. However, it’s important to remember that land is a long-term investment. The key to success is to purchase property at a below-market price and hold it for the long term.
One way to find good deals on land is to work with real estate developers. Developers are always looking for new properties to add to their portfolios, and they’re usually willing to sell land at a discount.
Another option is to look for properties that are in foreclosure or tax delinquent. These properties can often be purchased for a fraction of their market value.
Of course, it’s important to do your due diligence before purchasing any property. You’ll want to make sure that the entire property is free and clear of any liens or encumbrances.
You’ll also want to research the local zoning laws to make sure that you can use the property for the purpose you have in mind.
But if you do your homework and purchase wisely, land investments can be a great way to build wealth over time.
15 Real Estate Investment Strategies
Let’s take a look at 15 of the most common forms of real estate investment strategies below. There is bound to be a solution of two that fits your criteria.
1. Fix & Flip
Fix and flip is a term used in the real estate industry to describe the purchase of a distressed property with the intention of quickly selling it for a profit. The investor usually makes improvements or larger renovations to the property before putting it back on the market.
Usually fix and flips are at the low end of the real estate market and flipped quickly. The starter homes are an ideal place to start for beginner real estate investors, who want to make a business out of real estate investment. Also, it is a good way to build up some cash for moving onto larger projects and real estate assets.
PROS:
- It provides a good return on investment, which can generate positive cash flow.
- No one lives on the property so work can progress very quickly.
- Starter homes are great for learning DIY skills such as decorating, tiling and plumbing. Here’s information on Planning A Renovation
CONS:
- If the property takes longer to sell than anticipated, the investor may be stuck paying two mortgages.
- Property taxes and holding costs can eat into profits.
- Beginner real estate investors may not have the necessary skills or experience to successfully complete a fix and flip without hiring skilled labor.
- The market for flipping properties can be volatile, making it difficult to predict profits.
2. Wholesaling
Wholesaling should be considered as one of your real estate investment strategies. This is the process of finding deeply discounted properties and then assigning your purchase contract to another buyer. The key to success in wholesaling is to find deeply undervalued properties, usually at least 30% below market value. Once you find a property, you’ll need to sign a purchase agreement with the seller.
PROS:
- The main advantage of wholesaling is that it allows investors to buy properties without having to put up much capital of their own.
CONS:
- Most investors will only ever earn a small profit on each deal.
- You have to rely on the cooperation of other people in order to make a profit. If the seller backs out of the deal, you could end up losing money.
- Finding buyers who are willing to pay the asking price.
- Laws can sometimes make it difficult to find motivated sellers who are willing to work with wholesalers.
3. House Hacking
House hacking is the purchase of an income producing property. Typically a multi family rental, with the intention of living in one unit and renting out the others to cover all or most of your housing expenses.
It’s an excellent way to get started in real estate investing as it allows you to minimize your upfront investment, reduce your monthly expenses, and accelerate your path to financial freedom.
Additionally, house hacking typically results in appreciation and income from capital gains when you eventually sell the property. For these reasons, house hacking is considered by many to be a sound real estate investment strategy.
PROS:
- Investing in a larger property
- Pay off the mortgage quicker
- Ability to invest in own home and make another real estate investment at the same time
- Ideal for beginner investors
- Rental income
CONS:
- Need to manage tenants
- Close proximity of tenants
- Finding good tenants
- Responsibility for the maintenance of a large property
- Sacrifice privacy and space
4. Live In Then Rent
With this approach, an investor purchases a property with the intention of living in it for a period of time before renting it out.
This allows the investor to take advantage of lower mortgage rates and possibly even earn some sweat equity by making improvements to the property. Once the property is ready to be rented, the investor can move out and begin collecting rental income.
Because the investor has already lived in the property, they may have a better understanding of its potential as a rental and be able to better screen potential tenants.
PROS:
- Capital Appreciation
- Lower Mortgage Payments
- Possible Sweat Equity
CONS:
- Slowly route to financial freedom than of the other investment strategies.
- Tying up capital
5. Live In and Flip
This strategy is where an investor purchases a property to live in it for some time while making improvements that will increase the property’s value.
Once the improvements are complete, the property is then sold for a profit. This strategy can be especially effective in markets where values are appreciating.
PROS:
- Can be a quicker path to financial freedom
- You may be able to finance the purchase and improvements with a single loan
- Lower mortgage payments
CONS:
- The real estate market could decline before you are able to sell.
- Only suitable for private investors
6. BRRRR Investing
The BRRRR strategy is an approach to real estate investing that emphasizes rehabbing and refinancing properties in order to “buy, rehab, rent, refinance, repeat.”
The goal of this strategy is to purchase a property, make improvements to it so that it will appreciate in value, then refinance the property.
PROS:
- Can be a quick way to build equity
- You can use the equity from one property to purchase another
- Cash out finance can be used for repairs or improvements
CONS:
- The real estate market could decline, leaving you with an undervalued property
- It can be difficult to find properties that meet the criteria for this strategy
- You will need to have a good understanding of the real estate market and the rehabilitation process.
7. Short Term Buy Hold
The short term buy hold investing strategies is where an investor buys a property intending to hold it for a short period of time before selling it for a profit.
This can be an effective strategy in markets where values are appreciating quickly. It can also be used to generate income from rental properties.
PROS:
- Minimal risk
- Ideal for less risk tolerant investors or near retirement age
- Reduce real estate debt
CONS:
- May not suit families, constantly moving around
- Continuous costs involved in buying and selling property.
8. Long Term Buy Hold
The long term buy hold real estate investing is where an investor buys a property intending to hold it for a long period of time.
This can be an effective investment strategy in markets where values are expected to appreciate slowly over time. It can also generate income from a rental property.
PROS:
- Potential for large profits when you eventually sell
- Generates income from rental property
- Reduces real estate debt over time
CONS:
- Ties up cash flow
- You may need to make repairs or improvements to the property over time. Unless you earn rental income.
9. Debt Snowball
The debt snowball investing strategy is where an investor uses the money from the sale of one property to pay off the mortgage on another property.
This can be an effective way to reduce real estate debt and free up cash flow and should be considered as one of your real estate investment strategies.
PROS:
- Reduces real estate debt in economic uncertainty
- Frees up cash flow
CONS:
- May not be suitable in all markets
- You may need to sell properties at a loss to pay off debt.
10. All Cash Plan
The all cash real estate investment strategy is where an investor uses cash to purchase a property.
This can be an effective way to buy property in markets where values are declining. It can also be used to avoid the risks associated with leverage.
PROS:
- Can be a quick and easy way to buy property
- No mortgage monthly payments
CONS:
- Ties up a large amount of cash
11. Trade Up Plan
The trade up real estate investment is where an investor uses the equity from one property to purchase another property with cash out finance.
This can be an effective way to buy property in markets where values are appreciating. It can also be used to avoid the risks associated with leverage.
PROS:
- Improve your risk tolerance with how much control you have over your investments
- Diversify real estate portfolio and reduce risk
CONS:
- Tax liens and other encumbrances can complicate the process
- It can tie you into a long-term contract with a particular company
12. Hard Money Lending
This is where an investor uses a short-term loan to finance the purchase of a property.
This can be an effective way to buy property in markets where values are appreciating quickly. It can also be used to avoid the risks associated with leverage.
PROS:
- Can be a quick and easy way to finance
- Diversify investments and reduce risk
CONS:
- Interest rates can be high
- Monthly payments can be high
- Loans are often for a short period of time
- Lower LTV
13. Discounted Notes
Hard money lending is a type of financing in which borrowers receive funds from other investors, rather than from traditional banks or financial institutions.
While hard money loans can be a helpful tool for borrowers who are unable to obtain traditional financing.
PROS:
- Can be a quick and easy way to finance
- An option with traditional financing isn’t possible
CONS:
- Interest rates can be high
- Monthly payments can be high
- Loans are often for a short period of time
14. Syndications
A real estate syndication is a real estate investment group in which multiple investors pool their money to purchase a property.
This can be an effective way to buy property in markets where values are appreciating quickly. It can also be used to avoid the risks associated with leverage.
PROS:
- Can raise a large amount of capital
- Spread risk
CONS:
- Can be a complex financial arrangement
- Difficult to find reliable and trustworthy partners to invest with
- Losing some control
15. REITS
Real estate investment trusts, or REITs, are a type of investment that allows you to invest in real estate without actually owning any property.
REITs are a good strategy to diversify your portfolio and get exposure to the real estate market without the risks associated with leverage.
PROS:
- Investors will own a stake in a portfolio of properties without having to manage them directly.
- Can be easily bought and sold on the stock market
CONS:
- Less diversified and may be more volatile
- Subject to capital gains taxes when sold
- Not owning real estate and having less control over them
Conclusion Of Real Estate Investment Strategies
There are a number of tax-advantaged investing strategies available to real estate investors. These include purchasing tax liens and investing in rental property.
Each strategy has its own benefits and drawbacks, and investors should carefully consider their options before deciding which strategy is right for them.
However, one thing is clear: real estate can be an extremely lucrative investment, and those who take advantage of tax-advantaged investing strategies can maximize their profits.
