Choosing the best investment property strategy is a decision that is based on your personal goals. What you expect from your life goals and ambitions is what makes you choose the investment strategy that suits you best. It can be best described like matching your own personality with that of someone else, if your significant other was an investment strategy. The idea of the decision making process when choosing a strategy is picking the one that will maximize your profits and minimize your risk and losses.
There are two main criteria to look at before making a final decision on the best investment property strategy for you. You have to consider your personal situation that includes expectations, finances, limitations and weaknesses. Without being honest and true to yourself about your own capabilities, you might face a potential crisis as soon as you start. Knowing what you are good at and what you’re lacking at is not self-criticism, its self-improvement. A way to make you choose better and become better.
After a period of self-reflection about your goals and how to achieve them, it is easier to choose a specific strategy. Understanding the strategies, their finances and the labor that comes with them is enough to make a final decision. If you like what you will do in the end, that is surely enough. The strategies are not restricted to residential properties; there are options at vacant land, commercial properties and real estate investment trusts. Choosing one of them is solely based on what you see yourself doing.
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Factors in Strategy Decision Making
- Understand what are your financial flexibility and your financial goals. If you misjudge your financials and how much you can invest then you might be left short-handed mid way through your investment. That leaves you without money and with no investment to generate more cash. Calculate every tiny detail for all possible strategies to know the best one financially for you. Second step would be to know your financial goals, or in other words how much money are you expecting to make from your investment. Understanding that helps in the selection process as well.
- To choose your best investment property strategy you need to understand that risk is an inevitable part of it. The level of risk however is your doing. The higher the return you want the more risk it brings of course. To understand the risks it is essential to study them and analyze them and eliminate unwanted risks.
- An investment in real estate is not a short-term one; if you are willing to invest then you should know and understand that you are in it for the long run. You can’t be impatient and expect to get rich in a month or even a year. It takes time to grow your investment to generate money out of it.
- Are you willing to expand or not? The initial investment’s success brings a more serious question that can develop your investments more. If you are successful and doing that well in real estate then why not investment in another property. After all you know the best investment property strategy that works for you, it can double your money and so on.
Common Strategies in Real Estate
Buy and Hold
This is the most common and most popular strategy for real estate investors because of its simplicity and its rewards. The concept is to purchase a property, renovate it and then rent it for as long as you want. That way you earn money each month from renting it to tenants and you patiently wait without any rush to sell it for profit in the future. The important part about making this strategy work is that you have to understand how to evaluate property and their value before purchasing. Buying bad property will not give you any chance of renting it or selling it for profit. Understanding when to sell is also vital, for that you need to monitor the market intensively and be positive about the opportunities or deals you might get.
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House Flipping
Considered the best investment property strategy for making money as quickly as possible. House flipping is not for an inexperienced investor that much is certain. It requires extensive knowledge of the real estate market. Buying an unwanted property that is going for a price cheaper than the market price has an amount of risk involved. What if you invest in the property and then pay more to renovate it and it never sells? This is why you need to be sure and have enough expertise to ensure that the house flip will not only damage you financially. Unlike the buy and hold strategy, house flipping is a strategy dependent on speed. You purchase the property, renovated it and sell it as quickly as possible to avoid running costs of maintaining the house like expenses and taxes. Mastering this strategy with market understanding makes investors generate so much money in so little time and that is why its one of the favorites worldwide.
Related: How To Save On Fix-and-Flips
These are the most common strategies in real estate that are being used today. There is more of course but these are the ones that are sure to generate money with enough knowledge. To succeed in either of them you need to be prepared when choosing which one to follow because both of them have different plans, time-frames and financial investment requirements. Your ambition should match the outcome of the one you choose.