What are the best investment strategies available in the real estate market?
In today’s real estate market, there are tens of different investment strategies that real estate investors use to make money investing in real estate.
While there are numerous investment strategies that have emerged in the last few decades that are all considered lucrative and profitable, some of the oldest real estate investment strategies remain at the top of the list and are still the most commonly used in today’s real estate market.
Whether they are old or new, these investment strategies are the simplest and easiest entry-level investments in the real estate market, and they are accessible to all types of real estate investors, including beginners who are still looking for their first investment opportunity.
Below are the top investment strategies that are used in today’s real estate market and their advantages and disadvantages.
Note: To learn more about all aspects of real estate investing, continue reading our blog.
Rental Properties
Rental properties are the most popular form of investment properties in the real estate business. In fact, rental properties have existed for thousands of years, and they have survived the test of time while remaining at the top of the investment strategies that are available to real estate investors today.
There are two main types of rental properties in the real estate market – long-term rental properties and short-term rental properties.
Long-Term Rental Properties
Long-term rentals are the oldest type of rental properties, and the most common one. Also called traditional rentals, long-term rental properties are investment properties that you can rent out to tenants for extended periods of time that range from several months to several years.
This type of rental properties is the easiest to invest in, and it is generally simpler to own and manage than short-term rentals due to the long periods of time between each tenant turnover.
Short-Term Rental Properties
Short-term rentals are a relatively modern concept in real estate investing that was made popular by companies like Airbnb and HomeAway. This type of investment properties is unique in that it can be rented out for shorter periods of time ranging from a single night to a couple of weeks or a month.
Short-term rental properties have been picking up popularity, rendering them a better choice for investing in real estate than long-term rentals in many cities around the world. However, investing in short-term rentals comes with a few disadvantages.
Firstly, short-term rentals are not legal everywhere. In fact, there has been an increasing number of cities and states around the world and in the US which have been banning short-term rentals or enforcing strict laws and regulations that can severely limit the viability of short-term rentals as investment properties.
Secondly, due to the frequent tenant turnover, short-term rentals typically require extensive amounts of time and effort for managing them and tending to the tenants and will thus cost more in terms of maintenance and repairs.
With that being said, in many areas around the world, short-term rentals have been performing extremely well to the extent that some real estate investors have made a career out of owning and running short-term and Airbnb rentals in many places around the world where they can generate much higher profits than traditional long-term rentals.
Related: Real Estate Investing: Traditional vs. Airbnb Investments
Fixer Uppers
Another one of the oldest and most common investment strategies in today’s real estate market is fixer upper investment properties. A fixer-upper investment strategy focuses on finding distressed properties that are in a poor condition and that are offered for sale at a drastic discount, purchasing these properties, fixing them and renovating them, and then selling them at a higher price for a margin of profit.
Fixer upper investment strategies vary in type, but they all come with a major advantage – making money in a short period of time.
Perhaps one of the fastest investment strategies for making money in real estate, fixer upper investment properties will typically take less than a year to invest in and reap in the rewards, making them a top choice for active full-time real estate investors who are trying to maximize their profits in the least amount of time.
Buy-and-Hold
While not exactly an investment strategy on its own, the buy-and-hold concept in real estate investing has existed for a very long time, and it is one of the main reasons why real estate investing is among the top choices for investors around the world.
The concept behind the buy-and-hold strategy is simple, and it relies completely on appreciation – real estate properties appreciate in value over time. So, purchasing a real estate property and holding ownership over it for a long time is a profitable investment on its own, even if you don’t intend to use the property for any other purpose.
However, the beauty of the buy-and-hold strategy is that it can be combined with other investment strategies to maximize your return on investment. To put it simply, any investment strategy that revolves around a real estate investor owning a property for a long period of time, like the rental strategy for example, will have a buy-and-hold aspect to it that can lead to the property’s value appreciating, which is a free and effortless profit for any real estate investor or property owner.
Related: Top 5 Major Cities for Buy-and-Hold Investment Properties
Online and Passive Income Investments
Of course, you can’t write an article about the best investment strategies to use in today’s real estate market without mentioning the more modern and tech-based online and passive income investment strategies.
Passive Income Investment Strategies
Passive income investments are strategies that revolve around investing your money in real estate without having to put any effort or time in managing the different aspects of your investment. In other words, passive income investment strategies are very similar to investing in bonds or the stock market.
The most common type of passive income investments in real estate is investing in a REIT (Real Estate Investment Trust). REITs will typically have diverse investment opportunities for any real estate investor looking to take part. With a focus on commercial real estate, real estate investors can get to choose which property they would like their money to be invested in, and the profits generated from the project will be distributed among all investors who have invested in it in the form of dividends.
The real estate investor, in this case, would not have to do anything or take part in managing or running the property.
It should be noted, however, that there are numerous types of REITs and other similar bodies for passive investing in the real estate market, so make sure to do your research and study your options well before investing in any of them. It should also be noted that REITs, in general, do not generate the same amounts of profits as the other investment strategies mentioned here, but they also require the least amount of engagement and you can invest in them with little amounts of money.
Related: What Are the Best Ways to Make Money in Commercial Real Estate for Rent?
Online Investment Strategies
In addition to investing in REITs, there has also been a large number of online services and websites that can be used for investing in real estate from the comfort of your own home. Websites like Fundrise.com, for example, can be used to invest in real estate in a very similar way to investing in a REIT. In fact, Fundrise refers to themselves as an eREIT that runs and functions completely online, and it has one of the lowest entry-amounts to start investing in it (down to a minimum of $500 in some seasons).
There are numerous other websites and online platforms that can be used to invest in real estate without having to leave your home. A quick Google search for the term “real estate robo advisor” will give you hundreds of results that you can choose from.
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Bottom Line
Investing in real estate has a very large room for creativity. With numerous investment strategies available to every real estate investor, you are free to choose any investment strategy that is suitable for you.
While the traditional and conventional investment strategies can be a sure way of making a profit investing in real estate, some of the newer and more creative investment strategies can have certain advantages that other strategies do not.
Before setting your mind on a certain strategy, make sure to consider all of the options that are available to you and to choose the one that is most suitable for you as a real estate investor, and for the market that you intend to invest in.
Finally, make sure to check out Mashvisor and the tools and features that we provide to help you find the most profitable and suitable investment property for you based on accurate readings and projections to determine the amount of profit that your investment will generate before committing your money to purchasing the property.
