Real estate investing offers several property investment strategies that suit the needs of different real estate investors. The best real estate investment strategy for you depends on how much time and money you are willing to invest and most importantly your long term real estate investing goals. Read this blog to learn how to choose the best real estate investment strategy for you.
Constraining Factor: Budget
Financing a real estate investment can be divided into 3 categories, based on which, you can choose the investment strategy that suits you the most.
- Low risk, budget-friendly: House wholesaling
- Low risk, less budget-friendly: Owning a rental property
- High risk, budget uncertain (unknown cost of renovation): Fixing and flipping
Constraining Factor: Experience
As a beginner real estate investor with little or no experience at all, investing in real estate is possible and profitable if you go for property investment strategies that do not require much experience.
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Buy and hold real estate
Among the many reasons why the long term buy and hold investment is the best real estate investment strategy, is that it requires little experience in property investing. Buying a rental property for the purpose of renting it out for a long period of time generates cash flow and passive income which can help you get started in real estate investing.
When experience is the limiting factor in choosing the best real estate investment strategy, going for a long term investment strategy is your best option because you can learn what you need to know as you move through the process to reduce any risks.
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Turnkey rental properties
For beginner real estate investors, investing in turnkey rental properties is another strategy that requires less experience. Turnkey rentals are buy-and-hold properties that are purchased from real estate investment companies. Purchasing a turnkey rental property saves you the trouble of finding a profitable investment property that is in the best location since all this is done by the real estate company. Buying a turnkey rental property can help you learn all the characteristics that make a good rental property, which can help you later in your real estate investing career.
Constraining Factor: Time
If you want to make quick money in real estate investing, then you should consider the following real estate investment strategies. These strategies are, however, not suitable for beginner real estate investors as they require experience and you might risk losing your money.
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Fix and flip real estate
Investing in fix and flip real estate is the best real estate investment strategy to get rich quickly in real estate. Fix and flips are properties that are bought for a price lower than their market price, renovated, and then sold for profit. Experience in property renovation and negotiating deals is required if you want to make money with this strategy. You also have to have a solid plan in order to ensure the process moves quickly and allows you to make a profit in a short time frame as there are many factors that can hinder this strategy.
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Real estate wholesaling
Real estate wholesaling is another strategy where you can make quick money in real estate investing. How does it work? Basically, you have to find a real estate property, negotiate a deal, put it under contract without paying anything, and then transfer the contract to another real estate investor for a fee.
Related: What Are the Best Short Term Investments in Real Estate for 2019?
Rental Properties: The Best Real Estate Investment Strategies
Owning an income generating property is definitely the best strategy to invest in real estate. When compared to other investment strategies such as wholesaling or fix and flip properties, a buy-and-hold strategy offers more investment security and capitalization. However, to ensure that you get the most out of the best real estate investment strategy, you need to know which type of rental property and rental strategy is best for you.
The type of rental property
As we’ve mentioned, choosing the best real estate investment strategy has a lot to do with your budget. So even though owning a rental property is a great choice in that regard, which type of rental property is better for your budget? According to your budget, and the payment you can put down on an investment property, these are your options:
- Single-family homes
Single-family homes are high in demand in every housing market. Therefore, mortgage lenders are not reluctant to finance a single family investment property since they consider it a low-risk investment. A 20% down payment of the property price would get you an investment property that pays for itself when you rent it out.
- Multi-family homes
Multi-family homes are less budget-friendly than single-family homes. But if you can afford to finance a multi-family property then the advantages of owning one surpass those of owning a single-family property. However, keep in mind that managing a multi-family property is more complicated and requires more effort on your behalf.
Related: Your Guide to Investing in Single-Family Home vs. Multi-Family Home in 2019
Long term vs short term rental properties
When it comes to investing in rental properties, real estate investors have the choice to go for either long-term rentals or short-term rentals. The choice between either rental investment strategy depends mainly on the location of the investment property and your investment preferences.
It is important to point out that by short term rental properties, we mean properties that are rented out for a short period of time like Airbnb rentals. This is not to be confused with the short term real estate investment strategies mentioned above. Rental properties are actually a long term real estate investment strategy.
- Short term rentals
It is no secret that Airbnb rentals are now the top choice for vacationers and people looking for short term rentals around the world. What makes it the best real estate investment strategy for many investors is the high rental income you can make from owning an Airbnb investment property. Just keep in mind that if you don’t want to hire a professional property manager, then the management is pretty hands-on.
Related: Airbnb Real Estate Investing: 3 Steps to Success
- Long term rentals
A long term rental strategy is the traditional rental strategy of renting out a property for a long period of time. Despite making lower rental income with traditional rentals, tenant turnover is less frequent and is usually bound by a contract so the management is arguably easier.
As mentioned earlier, the choice between the two strategies depends mainly on property location and the investment property. A quick real estate investment analysis would show you what strategy better suits your rental property.
Related: The Complete Beginner’s Guide to Investing in Long Term Rentals
Finding the Best Real Estate Investment Properties
Choosing the best real estate investment strategy is one thing and locating an investment property is another. To make money in real estate investing, you have to balance both. Mashvisor is your ultimate reference when looking for an investment property for sale. Among the tools we provide are the investment property calculator and the heatmap analysis tool, which can help you perform real estate investment analysis and neighborhood analysis to find the best income generating properties.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.