Real estate investors can profit off their properties in myriad ways. The best investment strategy ultimately comes down to individual short- and long-term goals. Some folks chase cash flow while others go for appreciation. Either way, as long as you know the tricks of the trade and your local market, you can generate income in real estate.
Following are some of the most common strategies real estate investors pursue to make more money from their portfolio:
While flipping houses provides quicker returns on your investment, renting an investment property can provide passive income over a long period of time. The key to success is to be able to retain high-quality tenants and regularly maintain the property. If you don’t want to deal with the hassle that comes with being a landlord, you can hire a property management company to take care of everything – from screening potential tenants to completing any repairs and maintenance needed.
Buy and Resell
There is no doubt there is much money to be made in the fix-and-flip market. Investors typically buy a property at a discount because of its condition, get it repaired, and resell it at a higher price. This strategy not only brings tremendous potential for profit but also a great deal of satisfaction from seeing through a makeover.
The best piece of advice here is to understand the costs and process and to have a sound grasp of your local real estate market so you can recognize a good deal and confidently project how much the property can sell for. Overall, an investor should pay no more than 70% of the after-repair value (ARV) of a property minus the repairs needed. The ARV is what a home is worth after it is fully repaired.
Try Short-Term Rentals
Platforms such as Airbnb and VRBO are just a few examples of numerous platforms that allow homeowners to monetize their vacation rentals. To compete against several other properties in your area, it is essential to first understand the ins and outs of the short-term rental industry. While short-term leases may offer less stability than yearlong agreements, rates are oftentimes much higher. When managed efficiently, a short-term rental property can be incredibly profitable.
Invest in Commercial Real Estate
While the risks of investing in commercial real estate (CRE) are typically higher than those of residential real estate, the prospects of large margins of profit can be enticing. It is important to understand that CRE comes in a wide variety of asset types, ranging from industrial buildings to office and retail buildings to mixed-used properties and warehouses. As your portfolio grows, you can beef up your net income through upgrades and renovations.
Another great opportunity in real estate is to monetize vacant properties as event venues. Whether you plan to hold weddings, birthdays or conferences, the location of your property is key if you are considering going down that route.
Are you interested in learning more about real estate investing? RLG would love to help you find a suitable investment strategy for your goals! Call us today to learn more!