The real estate industry is a vast one; there are dozens – if not hundreds – of different ways to make money as a real estate investor, and the first step to succeed in real estate investing is choosing the best real estate investing strategies for you. What is the best real estate investing strategy for you? Well, that depends on the type of your investment property, your budget, and your long-term goals.
Best Real Estate Investing Strategies: Buy and Hold Strategy
This is probably the most common and most simple real estate investing strategy because it offers a steady added rental income and the opportunity to gain appreciation. The buy and hold strategy involves buying a real estate property and renting it out for a long period of time. This makes one of the best real estate investing strategies for long-term real estate investments properties.
Basically, a buy and hold investor makes a profit by renting out the investment property and either collecting cash flow every month or simply holding the property until it can be sold for a gain in the future. However, not all buy and hold properties are the same. These can range from single-family homes, through multi-family homes, to entire apartment buildings.
This is one of the best real estate investing strategies, but a buy and hold investor needs to understand how to evaluate real estate deals and opportunities. This requires research about the current state of the housing market, the specific neighborhood, and the rental property expenses. Another important factor that a real estate investor has to consider before buying an investment property as a buy and hold is positive cash flow because money is otherwise lost every month. Moreover, a real estate investor has to decide whether to become a landlord and manage the investment property on his/her own or hire a professional property management company.
One advantage of the buy and hold real estate investing strategy is that during the time that a real estate investor holds the property and rents it out, the mortgage is paid down each month, which increases equity on the investment property.
Related: Top 5 Major Cities for Buy-and-Hold Investment Properties
Best Real Estate Investing Strategies: Fix and Flips
Fix and flips are the best real estate investing strategies for real estate investors seeking active, short-term investments to quickly make money. This real estate investing strategy involves buying real estate properties at a cheap price, renovating and improving them, and then selling them for a profit. Don’t think of flipping as a passive activity; when real estate investors stop flipping, they stop making money until they start flipping again.
When looking for real estate properties to fix and flip, look for deal breakers. After setting a budget, it’s important to consult with an inspector, a contractor, and an appraiser to help you identify issues and avoid losing your time and money. Generally, the most popular type of property to flip is the single-family home.
When going for the fix and flip strategy, a real estate investor attempts to buy, repair, and sell the investment property as quickly as possible to ensure maximum profitability and avoid more monthly expenses such as financing charges, property taxes, utilities, and any other maintenance bills required to keep the house in good financial standing.
Related: 5 Tricks to Save On Fix-and-Flips
Best Real Estate Investing Strategies: Airbnb Rentals
Airbnb rentals are a type of buy and hold properties, but are vacation rentals or short-term rentals. There has been an increase in the number of Airbnb investors as Airbnb rentals have proved to be profitable and sometimes produce more rental income than traditional rentals. They offer the real estate investor the flexibility to choose what day or month to rent, and also how much to charge from tenants.
However, before buying real estate investments properties to rent out as Airbnb rentals, there are different things to keep in mind. In general, these rental properties take more effort to manage and involve more maintenance costs, and there is the possibility that you may go weeks or months without a short-term renter, as opposed to traditional rentals where you ensure a steady monthly rental income.
In addition, many states and cities have legal regulations or restrictions for having short-term rentals, or Airbnb rentals. Therefore, you should search for the best real estate investing strategies in your local area to find out if investing in traditional rentals or Airbnb rentals yields higher return on investment.
Best Real Estate Investing Strategies: Real Estate Wholesaling
It is not always required to spend money in order to make money in real estate. Wholesaling is one of best real estate investing strategies for making an income without having to spend any money at all.
Real estate wholesaling is the process of finding great real estate deals from sellers who are interested in putting their property up for sale, writing a contract to acquire the deal, and then selling the contract to a buyer. Real estate wholesalers generally never actually own the property they’re selling. Instead, the wholesaler is a middleman between a property seller and a property buyer who gets paid for finding real estate deals.
Many successful real estate investors consider real estate wholesaling one of the best real estate investing strategies due to its reputation for being an easy strategy. In addition, this strategy is one with low startup costs; there are no repairing costs, loan fees, bank fees, or other complications because the real estate property is not actually owned by the wholesaler.
However, it is not so easy to become a successful real estate wholesaler as it sounds. Wholesalers must constantly seek out the best deals and have to network and make contacts in order to have a database of potential property sellers and property buyers.
Related: Learn All You Need to Know About Wholesaling Houses in the US
Best Real Estate Investing Strategies: Commercial Real Estate
Joining commercial real estate investing can be one of the best real estate investing strategies as it leads to huge returns. Commercial real estate investments can vary dramatically in size, style, and purpose, but esentially they involve investment properties that are leased to businesses. Some commercial real estate investors rent out to small local stores, while others (with larger properties) rent to big supermarkets or other businesses.
While there’s an opportunity to rent out commercial real estate properties to big businesses to generate positive cash flow and steady rental income, there’s also the possibility of longer holding periods during times of vacancies which can last a longer time than with residential real estate properties. Some commercial real estate properties stay vacant for months or even years. Thus, investing in a commercial real estate is considered one of the best real estate investing strategies for experienced real estate investors who have a solid financial position, not for beginners.
Best Real Estate Investing Strategies: Passive Investments
Another one of the best real estate investing strategies is to passively invest in real estate. You could do this by investing through a Real Estate Investment Trust (REIT), which is when a group of real estate investors pool their money to buy large real estates investments, such as malls and skyscrapers. These passive investments generally have higher return on investment and less risk.
One more way to passively invest in real estate is lending your money to a real estate investor looking for a property to flip but is having difficulties getting a loan from a bank. The investors would pay the 20% down payment and closing costs, and as the lender, you would receive interest payments on the loan and a final payment at the end of the term.
Passive real estate investments are one of the best real estate investing strategies because you do very little work and get a share of the profits.
Best Real Estate Investing Strategies: Bottom Line
To succeed in real estate investing, you need to understand the best real estate investing strategies and choose the right one for you. There are many strategies for you to choose from including buy and hold, fix and flips, Airbnb rentals, real estate wholesaling, commercial real estate investing, and passive investments.
Mashvisor offers a selection of tools which helps you in facilitating your search for new real estate properties, helping you with the real estate market analysis and providing you with real estate investment tips and advice, in addition to hundreds of blogs related to everything real estate, including the best real estate investing strategies.
For any more information and guides on how to make the best real estate investment decisions, check out Mashvisor.