Best Real Estate Investment Strategies

As the real estate world expands, new real estate investment strategies are springing up. This fast-increasing range of lists could be overwhelming and make it difficult to choose a strategy. It may not be right to categorically flag a real estate investment strategy as good or bad. What works, however, is that you analyze the different strategies available to identify what option would work for you best.

Several factors play a role in determining the best real estate investment strategies for different people. These factors could include the expected return on investment and the amount of money the investor is willing to spend. Another factor that heavily influences an investor’s real estate investment strategy is their risk appetite.

The greater your risk appetite as an investor, the higher the return on investment you will likely make. Another factor that could influence your choice of real estate investment strategy is the duration of time you can spare.

Real estate is an investment option with several benefits. It tends to appreciate over time. Hence, how much time you can spare influences your choice of location and the type of property you should invest in. Without taking much of your time, let us examine the 15 best real estate investment strategies you could look out for.

7 Best Real Estate Investment Strategies for You

1. Buy and Rent                                                                  

Buy and rent is a real investment strategy that involves you buying properties that you can rent out. You could either manage these properties yourself or hire a manager to get it done. Before venturing into the buy and rent investment strategy, you need to conduct thorough research.

Have a good understanding of property renters’ needs and also confirm the expected return on investment for the property. If you are unable to get a ready property that matches the renters’ needs, you could practice the BRRRR method.

The BRRRR method is a pretty straightforward method through which you could produce the renters from existing properties that don't match up to the standard.

The B in the BRRR method means that you start by buying an undervalued property. Afterward, rehab the property so that it can match up to the market expectation and then you will be able to charge the ideal market rental price for the property.

After the rehab process, rent out the apartment to a qualified tenant, and then refinance the property. Once the property has a track record of generating steady cash flow, you could pull out your initial investment from the property.

The buy and rent strategy is a great way to earn steady passive income. However, it may be challenging if you are not skilled at managing tenants. To ensure you do this right, catch up on this article: top tips to be successful in real estate.

2. Wholesaling

Wholesaling is an investment strategy in which you serve as a middleman between the seller and the new purchaser. Unlike other real estate investment strategies, wholesaling is an active real estate investment strategy requiring a buoyant network of buyers and sellers.

In real estate wholesaling, you enter a contract with the seller to buy a property. However, you'd assign that contract to an interested buyer almost immediately. Your contract with the buyer will cover the original price of the property and your interest in finding the property.

Before venturing into real estate wholesaling, it is essential for you to have a broad knowledge of the real estate market and how it operates. With a strong arsenal of real estate knowledge, you can make a remarkable profit without owning real estate properties.

One of the advantages of wholesaling is that you do not need massive capital to get started. If you know your way around the market, you might not need to use any capital at all. However, you have a limited time frame to flip the contract to an interested buyer. Failure to flip the contract early may cause you to lose the contract.

3. Flip and Sell

The flip and sell strategy is a real investment strategy in which you buy an apartment simply for remodeling and selling. There are two ways you could go about the flip and sell strategy. You could buy the property and leave it dormant till it is ready for sale. In some other situations, you could acquire the property and live in it while simultaneously remodeling.

In either of the two cases, the end goal is to upgrade the property to market value and sell. The flip-and-sell strategy could be capital-intensive. Before venturing into this strategy, you need to have enough capital to buy the property and renovate the property.

The flip-and-sell property is advantageous because you make your money back as soon as you sell your property, and this can happen in only a matter of months. This real estate investment strategy therefore saves you the stress that tends to come with monitoring and following up on tenants and real estate managers. However, you need a strong network of real estate professionals to succeed in the flip-and-sell strategy and sell off very quickly.

4. Crowdfunding and Syndication

Real estate syndication is a real estate investment strategy that is not so popular. A real estate syndicate is a group of investors who pool resources together to purchase a new property. In other cases, this pool of resources is used to build commercial real estate.

Typically, the syndicate is made up of developers, knowledgeable real estate professionals, and investors who would fund the project. The knowledgeable real estate professionals are often referred to as sponsors. Sponsors play an active role in syndication. They are saddled with the responsibility of sourcing for real estate properties investors can invest in.

Sponsors also hire developers, track the progress of the real estate development process, make decisions for capital allocation, and distribute profits to partners.

On the other hand, investors play a more passive role. They are often referred to as limited partners. Investors are responsible for contributing the bulk of the capital required for the execution of the real estate investment.

Crowdfunding is a subset of real estate syndication. In this scenario, investors and sponsors would be connected via a real estate investment/crowdfunding platform. The platform vets the available projects and gives you a chance to weigh the risks associated with the different projects, making it easier for you to choose the project that suits you best.

One of the benefits of crowdfunding platforms is that you can diversify your portfolio of real estate investments across different geographical areas. Additionally, the platform helps you conduct the required research and provides you with other important information. Note however, that these crowdfunding platforms usually charge management fees.

5. Fractional Investing

Fractional investing is a chance for you to invest in a fraction of a real estate investment without owning the whole property. This strategy implies that you can invest in a real estate property without spending so much money.

Fractional investing gives you the chance to own capital-intensive real estate investments without investing huge, capital investments. Rather, the capital will be split across several investors in the fractional investment.

One of the benefits of fractional investing is that you can diversify your portfolio across different real estate properties. Additionally, it takes the stress of making major decisions in the property off you. However, investments from a fractional investment may only come quarterly or semi-annually.

6. Hard Money Lending

Hard money lending is an investment strategy in which you lend money to real estate investors who buy and hold properties. Hard money lenders have the right to set the terms for financing and earn interest on the property that was invested in. However, it is essential for these terms of the agreement to be clearly stated before the project is embarked on.

Hard money lending allows you to have a part in real estate investment without being actively involved in the market. Via this strategy, you can benefit from real estate interests without the stress of monitoring the market and other intrinsic real estate details.

An advantage of hard money lending is that you set the terms of the agreement and get a chance to earn money passively. Unfortunately, there is no guarantee that the borrowers would pay the money back. One thing you can however do to combat this is to ensure that you only lend money to experienced investors with previous track records of success. Additionally, you need to pay due diligence to investigate the credibility of borrowers so that you don’t fall victim to scammers.

7. Real Estate Investment Trusts

Real estate investment trusts can be likened to mutual funds or stocks. This is a real estate investment strategy through which you own the shares in a company that invests in commercial income-producing properties.

This investment strategy is a suitable investment plan for you if you desire to generate passive income from real estate. Just like stocks, you could go to rest while the investment company does all the necessary real estate tasks.

As a starter who is just trying to test the waters, real estate investment trusts could be a suitable option for you. You could give this strategy a try while you figure out how real estate works. Additionally, real estate investment trusts are an avenue for you to invest in several real estate companies at once.

Just like the stock market, the income you get from a real estate investment trust is dependent on how well the company is booming at the time. Additionally, you may not get the direct benefits that come from owning a real estate property yourself.

Conclusion

The real estate market is a broad market with several entry points. While some are capital-intensive, others only require your skill and knowledge. The real estate market is open to both professionals and beginners. Hence, you could engage in the market both passively and actively.