There’s no doubt real estate investing is one of the best wealth building strategies of all time, allowing investors to rake in six or more figures with a solid portfolio. In addition to building wealth, there are a number of tax advantages investors benefit from.
If you are ready to see it for yourself and hit the market, following are some common – yet highly effective – real estate investment strategies.
If you are new to real estate investing, know that it’s never too late to get your foot in the door. For your first purchase, consider starting with less expensive wholesale properties. Wholesaling is the process through which the wholesaler contracts a home—usually one that is distressed—with a seller, shops that home around to potential buyers, and then assigns the contract to one of them.
Wholesaling is a less risky method for new investors as it does not require a significant amount of capital to get started. A good rule of thumb is to have a solid list of potential buyers prior to making an initial offer to the seller.
Flipping property is all the rage with both individual and institutional investors. Turn on any home or DIY network or browse social media platforms and you will undoubtedly find thousands of folks showcasing their home flips.
Investors typically buy a property at a discount because of its condition. 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.
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.
A real estate investment trust (REIT) is a publicly traded entity that owns, operates, or finances income-generating real estate. By putting your money into a REIT, you are essentially buying a tiny piece of a portfolio owned by a corporation (or trust). As their portfolio appreciates, the trust pays out dividends to the investors.
Relative to other investment options, REITs are far less time-consuming and labor-intensive and may generate steady income stream for investors. On the flipside, they offer little in the way of capital appreciation.
The BRRR Method, which stands for “Buy, Rehab, Rent, Refinance,” is one of these buzzwords that is often thrown around in the real estate industry. Notwithstanding the hype, this strategy can yield great returns on investment. Simply put, BRRR boils down to adding enough value to a property to recover the money you invested in it. This, in turn, allows you to take the money and use it to buy more properties. Over time, you will be able to build a real estate portfolio that gives you complete financial independence.
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!