Real estate is a popular form of investment because it is less volatile than other options and offers a stable ROI.
So whether you’re a newbie getting started in real estate investment or an experienced investor looking to diversify your portfolio, read until the end of this article to discover the top five real estate investment strategies.
1. Invest in rental property
We start this list with the most popular form of investment in real estate. By default, most people think of being a landlord when they hear you’re into real estate. Although there are several other ways to invest in realty, this strategy is commonly known because it is easy to understand and provides a stable and reasonable ROI.
After finding a way to finance the purchase of a house, there are many things you can do with it. You could rent it out to one family and reduce the workload of management, or lease out the rooms in the same house for a little extra cash. Either way, carefully screening your tenants is essential to ensure your weekly/monthly income remains reliable.
Of course, as the landlord, you have your end of the bargain to fulfill. You have to ensure your rental property remains habitable, which involves tending to all tenant complaints and repairs to avoid a lawsuit.
2. Do a buy-and-hold
Real estate is a more stable form of investment than most because of its likelihood to appreciate over time. It’s almost guaranteed that when you purchase property, it will increase in value, which is the probability that this strategy banks on to work. Buy-and-hold is a straightforward and relatively passive way to invest in real estate.
All you have to do is buy a property and then sell it later for a profit. Most investors take on minor cosmetic changes between buying and selling and rent it out for extra cash. If done right, you can pay off your mortgage and make a handsome profit.
3. Do a fix-and-flip
A fix-and-flip is similar to a buy-and-hold, but the difference is in the amount of renovation you need to complete before selling it for profit. The goal in house flipping is to buy a fixer-upper at a discounted rate, make cosmetic changes, and sell it as fast as possible.
But you need a certain level of expertise to undergo this kind of strategy because a common pitfall most investors make is underestimating the amount of work a house needs. A great way to maximize your profit is to have a good relationship with contractors so you can buy materials such as paint, tiles, and so on at a discounted rate. You’ll find that this option works best in places with high demand for properties.
4. Buy REITs
If you’re still grappling with making the right choice of a property to invest in, then you can leave that to the experts in this investment strategy. REITs, short for real estate investment trust, are like stocks you can purchase from a real estate company that invests in several rental or commercial properties. When you do so, you become a passive owner of their rental portfolio and regularly earn a profit, called a dividend.
REITs are an attractive option to many people, especially retirees because they are laid-back to invest in real estate. It’s also an easy way to build your portfolio if you don’t have significant capital. Although that only applies to the publicly traded ones. Privately sold REITs are typically more expensive and volatile. So unless you thoroughly understand the company and its operations, it’s best to steer clear of them.
While REITs are an excellent source of income, both long-term and short-term, mainly because of their liquidity, the returns are on the smaller end when compared to interests from self-owned rental properties.
5. Get into wholesaling
If you have a small capital but don’t mind being an active investor, you may consider wholesaling. The name comes from the word wholesale, and as it implies, it involves you acting as a middle man between the owner of a property and an interested buyer. It’s very similar to a real estate agent because you don’t own the property; you collect a finder’s fee for connecting the current and new owner.
As straightforward as it sounds, there are some drawbacks. While your credit score has no bearing on the outcome, and you require very little income to run your operations, selling a house can be a challenging undertaking. It requires some expertise, and it could be overwhelming if you’re working with a tight deadline. You need a solid real estate network and marketing strategy before embarking on such a task.
There you have it, an outline of five excellent real estate investment strategies. Both oldies and newbies to the real estate market stand can add something here to their portfolio right away, irrespective of your interested level of involvement.
Whether you’re a passive or active investor, the key to success is proper real estate management. Don’t forget that you’re providing a service to your prospective tenants or buyers, and your delivery matters a lot. Rather than take it all up on your own, you could hire a professional property management firm to handle marketing, maintenance, and other tenant services. People find that it’s worth it because you save countless hours and enormous effort on your part while still reaping the benefits of maximum productivity from your investment.