Top 6 Strategies for Investing in Real Estate
Monday Oct 05th, 2020Share
Investment in real estate is a popular investment choice for several investors; if done properly, real estate investments can be very lucrative. In this article, we'll tell you six strategies for investing in real estate.
Fix and Flip
This is the starting point for a majority of real estate investors. The fix and flip strategy are about identifying properties that need minor work, making the repairs, and reselling them for a profit at the highest price possible.
Even I used to fix and flip as the starting point of my real estate investment career, it paid the bills and produced cash savings for potential investments in the future. It isn't always plain and simple, but it is definitely rewarding to enhance the beauty of a house and then selling it for a large profit.
Wholesaling is about finding good offers on investment property and then reselling them for a small profit. Negotiating and marketing skills are of utmost importance to find those successful offers in this strategy. So if you're good at that and can be a great salesperson, then you should choose the whole sailing.Another thing you can do is find good deals of the more seasoned investors,and earn a profit if they buy the deal.
But if you're like me and don't like the idea of being a salesperson, then perhaps you should find a better approach.
House hacking is about living in a revenue-producing home, a house with extra space such as a garage, guest house, or spare bedroom,which you can rent. Not only will yoube able to reduce your overall cost of living by renting out a portion of your home, but you will also get familiar with the landlord business.Later on, you can move out and turn the house into a full long-term rental once you're done living there.
Commercial real estate is a bit riskier as it is subject to the ups and downs of the wider economy,unlikea residential real estate. You can see more vacant stores and officeswhen taxes on the businessrise; the businesses go bankrupt or downsize as the economy slows, leaving behind vast empty warehouses and offices in their wake. You probably saw this at one point or another, with your own eyes in your own city.
But still, there are advantages to investing in commercial properties.
- Commercial leases are longer than residential leases. A good tenant will give you some stability and potentially reduce your risk. The longer the lease, the more value it adds to the property.
- You will obtain more favorable tax treatment on commercial investments than residential, depending on your location.
- Tenants have to renovateor maintain the property according to their needs, which keeps your costs down. They also have a complete maintenance contract, and when the lease ends, they have to hand the property back in the same state they took it in. So unlike residential investments, commercial investments often don't require maintenance for wear and tear at the end of the lease.
Buy and Hold Rentals
This strategy is about purchasing and keeping rental properties for a fairly shorterperiod(maximum offive years). The main goal of this strategy is often to force property appreciation through remodeling, raising rent, cutting down expenses, or all of these.
For a multi-unit apartment and turn-around ventures, the short-term buy and hold model works very well.
This technique involves owning a property to hold it for a longer period. Rental income, depreciation tax shield, loan repayment, and,most importantly,price appreciation are among the major benefits of this slow and steady approach. Many investors continue to use this strategy, especially for properties located at a high in-demand area. These properties easily attract best tenants, they areeasier to manage, and theirvalue appreciation increases overtime.
Real Estate Investing Trusts (REITs)
Real Estate Investing Trusts or REITs are very similar to a mutual fund. But instead of owning a piece of multiple bonds or stocks, REITs allow you to own a chunk of several income-producing commercial assets.
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