15 Best Real Estate Investing Strategies
Image from Unsplash
Real estate strategies:
These are the different routes up the financial mountain using real estate.
Each has its pluses and minuses.
Keep in mind that most investors combine different strategies at different times.
We have 15 different types of real estate strategies, and to simplify them, we have divided each of these strategies into groups based on how they are applied. Now is the time to break it down for you.
These groups include:
- Business strategies
- Starter strategies
- Wealth building strategies
- Debt Strategies
- Passive strategies
Business Strategies
More businesses than investments, these strategies can generate income and replace your job.
But you must be prepared to invest in upfront time and effort of a business start-up to make them work.
Here is a breakdown of Business Strategies:
1: Fix-and-Flip:
The Fix-and-Flip strategy is a business of finding properties that need work and fixes.
After purchasing them, you repair and resell them at higher prices for a profit.
2: Wholesaling:
Wholesaling is the business strategy of finding good deals on investment properties and reselling them quickly for a small markup.
The crux of this business is being good at marketing and negotiating to find those good deals.
If you’re good at sales, you’ll like wholesaling.
But if the idea of sales makes you cringe, I’d look for a different strategy if I were you.
Begin a real estate career doing a variation of this strategy called bird-dogging. hunt down deals for other more experienced investors.
Then get paid whenever they buy a deal that you find.
Starter Strategies
These are my favorite, safest ways to get started in real estate investing.
It requires little hard work, and you can even get started with a small amount of cash.
3: House Hacking
House Hacking means living in a home that produces income for you also.
It could be a duplex, triplex, fourplex, or house with extra rentable space like a basement, guest house, or spare bedrooms.
And by renting out part of your residence, you can reduce your total housing costs.
House hacking is a great strategy because you learn the landlord business while living as a renter.
Once you have overlived in the home, you can move out, then transition the property to a long-term rental.
4: Live-In-Then-Rent
Live-In-Then-Rent is simply living in a house that will eventually become a rental.
This means the house must work as your home AND as an investment later in the future.
But unlike house hacking, you don't rent the property while you live there.
Doing this strategy a few times is a great way to build a small portfolio, and you don't have to live next to your tenants like house hacking.
5: Live-In-Flip
The Live-In Flip is a strategy where you buy and move into a home, fix it up, and wait two years or more to resell it for a profit.
6: BRRRR Investing
BRRRR stands for Buy-Remodel-Rent-Refinance-Repeat. When done carefully, it's an excellent way to build a rental portfolio without running out of cash early in your investing career.
Essentially you look for fixer-upper properties that you can buy below their full value.
You can use short-term cash or financing to buy the property, and then after it's fixed and stabilized, you refinance with a long-term mortgage.
When done competently, you can pull most or all of your original capital back out for the next deal.
While I like this strategy, I think it's best when used early on a first build your portfolio.
Eventually, it's clever to transition to lower leverage and lower risk approaches instead of constantly leveraging as much as possible.
Wealth Building Strategies
These core wealth-building strategies focus on turning a small nest egg into a large amount of wealth.
Real estate investing has long been an ideal vehicle for this purpose.
7: Short-Term Buy and Hold Rentals
This strategy involves buying and holding rental properties for relatively short periods – perhaps 1 to 5 years.
Often, the purpose of this strategy is to force property appreciation (aka add value) by remodeling, raising the rent, decreasing expenses, or all of those.
The short-term buy-and-hold strategy works very well for multi-unit apartment turn-around projects.
These also work well for rentals in high-priced, appreciating markets that do not have cash flow.
An example of one particular application of the Short-Term Buy and Hold Rental strategy is the Buy 3-Sell 2-Keep 1 Plan.
8: Long-Term Buy and Hold Rentals
These are the strategy for owning real estate to keep it for the long haul.
The benefits of this slow and steady (and very successful) strategy include rental income, tax shelter from depreciation expenses, amortization of loans, and price appreciation.
I continue to use this strategy, especially on my properties in the best locations. I like to keep these properties because they attract the best tenants, are the least hassle to manage,e and tend to appreciate the most over time.
9: The Rental Debt Snowball Plan
The Rental Debt Snowball Plan is one of my favorite strategies to predictably build wealth, reduce risk, and eventually create an ongoing income stream from rental properties. It involves gathering all the cash flow from your current rentals and other sources and then concentrating that cash flow to pay off one mortgage debt at a time.
The magic of this strategy is the speed at that debt payoffs start to snowball (accelerate) over time.
If you do like to retire within 10-12 years or less, check out this Rental Debt Snowball case study.
10: The All-Cash Rental Plan
The All-Cash Rental Plan is similar to the Rental Debt Snowball Plan because it snowballs rental income for growth. But instead of using mortgages, you save up cash and buy a rental property without any debt.
11: The Trade-Up Plan
The Rental Trade-Up Plan is perfect for entrepreneurial investors willing to juggle the moving parts.
This strategy is a way to quickly build real estate wealth and income by moving from smaller to larger properties,
Debt Strategies
These debt strategies put you into the profitable (and often passive) role as a lender instead of an owner of real estate.
12: Hard Money Lending
Hard money lending is a strategy of making short-term loans to real estate investors who buy rentals or fix-and-flip properties.
Usually, the loans involve high-interest rates, points (upfront fees), and lower loan-to-value ratios.
While this strategy can be very profitable, it also incurs higher risk.
If you decide to take the properties back to foreclosure, you must be sure you are also protected.
I recommend educating yourself well before doing hard money lending, and if you are very serious, you should consider paid education for Hard Money Lending classes.
13: Discounted Note Investing
Discounted note investing means creating or buying notes (real estate debt) at a discount to the note's actual value.
Because of this margin of safety, you can create sizable returns and reduce your risk.
One form of Discounted Note Investing involves buying notes (typically those that are delinquent) from other owner-financing sellers or banks. These are much more advanced strategies, so I recommend studying them carefully before jumping in.
While this is a profitable strategy, federal and state regulations like the Dodd-Frank Act have made it much more difficult for small investors to navigate.
While there are a few exceptions, small investors must follow many of the same expensive rules as large lenders.
So, get help from your local attorney before beginning this strategy.
Passive Strategies
Although some passive strategies below still involve important upfront investment decisions, they require fewer day-to-day hassles than some prior strategies.
14: Syndications & Crowdfunding
Syndication is a strategy of pooling your money with other investors to buy real estate or make loans.
It's a way of investing in any other strategies mentioned above without putting the deals together yourself.
You invest your money with syndicators or general partners who find and manage deals for you (and they receive a fee).
Although Syndication/Crowdfunding is under a passive real estate investing strategy, this can be a little misleading. Investing in syndications and crowdfunding can be very yielding and easy, but successful investors with this strategy are still active.
These successful investors actively screen the sponsors, general partners, and deal opportunities before investing. In other words, they say NO a lot more than they say YES.
And these are very different from passive index investing and even REIT investing, where you make fewer agile decisions.
15: Real Estate Investing Trusts (REITs)
Real estate investment trusts (REITs) are very similar to mutual funds.
But instead of allowing you to own a piece of many stocks or bonds, these REITs authorize you to own a piece of many commercial, income-producing properties.
And unlike most of the other investment strategies above, this strategy is truly passive.
Finally, we believe that you have learned something new today.
We all love you we will keep bringing you simplified articles every day. And if there are any questions, you can always use the Ask Us A Question Form.
Thanks, and goodbye from here.
Related articles
More articles »
Latest Posts
Top 5 best cheapest and fastest VPS hosting providers
What is remote work? (Meaning, Examples, Type, Pros and Cons)
How to become a professional Writer, (step-by-step guide)
Tips for becoming a successful public speaker, and monetizing your skill
Creating And Selling A Successful YouTube Channel
More Posts »