Easiest Real Estate Investing Strategies
Investing in real estate shouldn’t have to be complicated. For those starting out, choosing the right strategy can lead to success faster. There are multiple ways to enter the real estate market, but some are easier than others. This guide breaks down simple real estate investment approaches that can help you grow your portfolio.
The Wholesaling Method
Real estate wholesaling stands out as a simple way for beginners to break into the market without a lot of upfront money. The approach is straightforward: find motivated sellers looking to sell real estate quickly, secure a contract, and then assign the contract to a buyer for a markup.
For example, a wholesaler might find a underpriced property and negotiate a contract with the seller for less than its value. Then, assign this agreement to a cash buyer for a profit. The amount becomes your earnings.
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2. House Hacking
House hacking is another method for beginner investors with limited exposure. The core idea is to purchase a multi-family property, reside in one unit, and offer the extra space. This enables the homeowner to reduce living expenses while gaining property ownership.
For example, if you buy a duplex, you can live in one unit and lease the other unit to a resident, paying for your mortgage. This decreases your out-of-pocket costs while helping you to gain real estate value.
The Buy and Hold Strategy
Owning rental properties means buying a home and holding it for monthly cash flow. This approach is ideal for property owners looking for steady cash flow and property appreciation. By leasing the property, owners generate monthly cash flow while benefiting from the property’s value grow over time.
For example, you could purchase a condo, offer it for rent, and keep it for a long-term period. During this time, rent from tenants pays the mortgage, while real estate prices increases. This plan builds wealth without needing daily management from the investor.
4. The BRRRR Strategy
The Buy, Rehab, Rent, Refinance, Repeat strategy consists of buying a discounted property, rehabbing it, leasing it, refinancing the loan, and then starting again. This strategy is perfect for those looking to scale up quickly. By leveraging existing equity, owners can grow their holdings without needing new money.
For example, buy a distressed home, fix it to make it rentable, rent it out, and then take out equity to use for another purchase. This cycle scales until the owner has a large portfolio.
Investing in Syndications
Real estate syndications allow those looking for passive investments to become part-owners of multi-million dollar properties. The syndication process involves collecting funds from multiple individuals to acquire multi-family apartments that would be out of reach for one person.
This approach works well for passive investors. By partnering with seasoned investors, you can participate in large-scale real estate without assuming management responsibilities.
Real estate syndications provide many advantages to those involved, including tax advantages. Unlike being a landlord, syndicate members distribute the profits and losses instead of taking active roles. This strategy lowers involvement while allowing for large-scale investments.
6. Real Estate Investment Trusts (REITs)
Investing in REITs provide a simple method for people to put their money in real estate without managing physical properties. This investment type aggregates the funds of multiple people to manage profitable properties, including shopping centers and industrial properties.
Investing in this asset class is similar to buying shares on the exchange. Investors acquire shares in the REIT, collect dividends based on the returns of the real estate assets, and enjoy the value increase of the REIT in the long term. REITs offers easy exit options unlike traditional property investments, which makes it an attractive method for individuals who want real estate exposure.
For instance, if you invest in a publicly traded REIT, receive quarterly dividends, and benefit from long-term value growth instead of maintaining the everyday management headaches. This method makes it easy for people to get into real estate markets without needing the operational burden.
The Short-Term Rental Strategy
Short-term rentals are increasingly common with the rise of platforms like Airbnb. This strategy requires leasing properties for nightly or weekly rates, catering to travelers, tourists, and business professionals.
Property owners can maximize income by charging higher-than-average rents, leading to higher revenue than regular leases. That said, this strategy also requires more active management, including advertising the property, managing bookings, and cleaning the unit between guests.
For instance, if you own a vacation home, you could advertise it on a short-term rental site and generate significant cash flow in high-demand months. While returns are appealing, time commitment increases as a result of guest management.
House Flipping
Fix-and-flip strategies requires acquiring distressed properties, repairing them, and flipping for a profit. This method is well-known because of the potential for quick returns. However, house flipping carries potential pitfalls, including unexpected repair costs.
Investors should thoroughly research every property before purchasing a property, calculating holding costs. With proper planning, this method can generate significant returns, but unexpected issues could transform a project into a financial burden.
For example, should you buy a damaged property for 50% of its market value and invest another 20% on repairs, one could sell it for significantly more, assuming demand is strong. This method is sensitive to local market trends, so due diligence cannot be overlooked.
Final Thoughts
These strategies offer a variety of ways for those looking to enter real estate. From wholesaling for quick profits to longer-term plays, there’s a strategy that aligns with their investment vision.
Whether you’re looking to start small with contract assignments, generate steady cash flow through rental properties, or invest in multi-family complexes, being aware of different strategies guides you to make the best investment.
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