When it comes to real estate investing, strategy is everything! With such large sums of money on the table, you must have a detailed plan in place to navigate the potential pitfalls and arrive at a profitable destination.
We discuss some real estate investment strategies to help build your property empire.
Thankfully, there are several routes up the money mountain in the world of real estate, so there’s almost certainly a strategy out there that suits your current finances and, of course, your financial goals.
The strategies we’ll be discussing today each fall into one of three categories, Business, Starter, and Wealth-Building. Let’s get to it!
Business-Based Real Estate Investment Strategies
The first category we’ll be putting under the microscope is “business.” These strategies yield big rewards that, if executed correctly, could become your day job. Fancy being your own boss? Then there are the strategies to focus on.
The Fix-’N’-Flip
The fix and flip doesn’t just make for scintillating television; it’s a fantastic investment strategy that can pay BIG if you have the right skills and a lot of drive. It’s a simple concept — Buy properties, fix them up, then sell them for an incredible profit.
Probably one of the most common approaches to real estate investing, it has a proven track record of securing ROIs. Still, if you want to maximize your profits, it involves a lot of complex DIY, so you have to be willing to put in the elbow grease.
Of course, you don’t have to take on the bulk of the remodeling yourself, but if you’re bringing in outside help, you have to have a keen eye for estimating property rehabilitation before you make your offer.
It’s too easy to get carried away and pick up property that needs too much work. Not only will your profit sink into the renovation budget, but you’ll also be waiting longer before you can resell.
Wholesaling
This is the strategy for the consummate bargain hunters out there. In a nutshell, real estate wholesaling is when you snag a good deal on a property, mark up the price a little, then sell it off almost immediately. This process can be repeated ad infinitum.
Although wholesaling can be highly profitable over time, you must have some serious confidence to give it a go. It doesn’t hurt if you’ve got some marketing or sales experience, as you have to fight for lucrative deals — It’s not for everyone.
Starter-Based Real Estate Strategies
As we’re sure you’ve surmised, starter real estate strategies are for those looking to get their foot in the door and make their first property investments.
Subscribing to one of the following approaches will get the ball rolling on your property portfolio reasonably safely and for a comparatively low buy-in.
House Hacking
House hacking involves buying a property, renting out empty space in said property, and raking in the rent money.
It’s a slow-burner but incredibly low risk, as there are always people looking for housing, and perhaps best of all, you learn the rudiments of land-lording, setting you up for success with more lucrative endeavors once you have the funds to move out.
When your entire property is rented, you can rinse and repeat, or perhaps even save up, giving one of the business strategies detailed above a try.
The downside here is that, for a long time, you have to sacrifice a bit of privacy, but if that’s a dealbreaker for you, check out our next suggestion…
Live-In Then Rent
The live-in then-rent strategy follows the same principles as house hacking, except that you never share your abode with any renters.
Instead, you purchase your property, live in it until you’re in a position to move elsewhere without selling up, then put it up for rent once you’re out of the picture.
Live-In-‘N’- Flip
This one combines the live-in then rent strategy with the fix-‘n’-flip one we started our list off with. Essentially, you purchase a property intending to fix it up, but you live in it while doing so.
Once you’ve finished the touch-ups, you simply wait until the right moment to sell comes along.
This strategy can take years to play out, but it’s a fantastic way to get started, and, as a bonus, the IRS only taxes profits exceeding $250,000, or if you’re taking this approach with a partner, $500,000!
B.R.R.R.R
Believe it or not, B.R.R.R.R investing has nothing to do with the cold. It stands for Buy, Remodel, Rent, Refinance, Repeat, and it’s a fast-progress, medium-risk strategy.
It involves snagging a fixer-upper using cash or short-term financing, fixing it up, renting it out, and refinancing with a long-term loan, thereby giving you the funds to repeat the process.
If you’re shrewd, you’ll see most, if not all, of your initial investment, come back to you for your second acquisition.
Wealth-Building Real Estate Strategies
Wealth-building strategies are about making a tidy, pre-existing nest egg work for you!
Short-Term Buy & Holds
What you’re trying to do here is buy a rental property, then boost value quickly by renovating, increasing rent, bringing expenses down, or all of the above.
Finally, you can sell up for an enormous profit if you choose to renovate or a small markup if you don’t.
Long-Term Buy & Holds
This is your classic land lording setup. You buy a property intending to rent it, and you do so until you can add yet another property to your roster, then another, and another, etc.
Rental Debt Snowball
Here we have an incredibly effective debt repayment strategy once you’ve got a few properties under your belt.
All it entails is pooling all income sources from properties or elsewhere and using them to pay off a single mortgage as fast as possible, then moving on to the next and doing the same.
The quicker you pay off your debt, the quicker you will start seeing significant returns!
Final Thoughts
There you have it — 9 tried and tested real estate investing strategies to get your creative juices flowing and give you an idea of the money-making potential of the housing market.
Bear in mind, however, that we’ve only scratched the surface here today, so don’t be disheartened if none of the above strategies appeal to you.
If you have the passion and the capital, the perfect real estate investment strategy for you is out there!
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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