Real estate investing is one of the best ways to make money and create wealth. Still, many are intimidated by the real estate investing industry. Well, we’re here to prove that making money in real estate is actually not as hard as someone would expect!
The world of real estate investing consists of various real estate investment strategies and ways to make money as an income property investor. Don’t let this overwhelm you! Real estate experts have agreed that certain investment strategies guarantee making money in real estate for the long term, short term, and even without having to actually own a rental property!
Before diving into these investment strategies, we should note that what works for one real estate investor probably might not work for another, and the best strategy depends on a number of factors including the type of the investment property, your location, budget, and personal financial goals.
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So, without any further ado, here are the best investment strategies for making money in real estate!
Making Money in Real Estate for the Long Term
Making Money in Real Estate – Buy-and-Hold Investment Strategy
The most traditional real estate investment strategy is the buy-and-hold. This strategy for making money in real estate is popular among income property investors not only because it allows them to build a steady stream of passive income, but also because it gives them the opportunity to gain long-term appreciation!
The buy-and-hold investment strategy works as follows: the real estate investor buys an investment property, rents it out to a long-term tenant, and makes money from collecting monthly rent. The great thing about making money in real estate from buy-and-hold investment properties is that they generate a steady cash flow AND appreciate over time. What this means is that the value of the rental property increases over time. Thus, the real estate investor can make a profit by selling the buy-and-hold rental property in the future for a higher price than the initial investment.
Another reason for the popularity of this strategy of making money in real estate is that any type of income property works as a buy-and-hold, whether a single-family home, a multi-family home, or an entire apartment building. Additionally, while the real estate investor is holding and renting out the investment property, the mortgage is being paid down each month using the collected rent. This further builds equity in the investment property!
Related: Buy and Hold Real Estate Is the Ultimate Investment Strategy: Here’s Why
Making Money in Real Estate – Rent-to-Own Investment Strategy
This investment strategy is similar to buy-and-hold as both involve making money in real estate by renting the income property to long-term tenants. However, the difference is that the rent-to-own investment strategy involves a signed contract between the real estate investor and the tenant which allows the tenant to rent the investment property for a set time period before actually buying it. Upon signing this contract, the real estate investor can’t place the rental property on the market for rent or for sale, and the tenant is legally obliged to buy this rental property when the contract expires.
Besides making money in real estate, rent-to-own has other benefits for property investors. First, the tenant is obliged to pay a non-refundable “Option Money Fee”, which allows income property investors to make a quick profit when the tenant first moves into the rental property. This real estate investment strategy also guarantees that the rental property won’t be vacant for the set time period, in addition to a guaranteed sale. Finally, property investors don’t need to hire a real estate agent to find a buyer!
Making Money in Real Estate for the Short Term
Making Money in Real Estate – Fix-and-Flip Investment Strategy
The first strategy for making money in real estate for the short term is investing in fix-and-flips. This investment strategy works as follows: the real estate investor buys investment properties below market value (because they’re foreclosures, short-sales, or in a bad condition and need plenty or repairing), and the investor then works on improving this investment property and sells it for a higher price than the initial investment, thus making a quick profit!
This way of making money in real estate is widely spread across the US housing market due to the increasing number of foreclosures which property investors could buy for a cheap and sell for a high price.
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Making Money in Real Estate – Airbnb Investment Property
Airbnb rentals are becoming widely spread among the investment strategies for making money in real estate. Following this type of investment strategies means property investors rent out their rental properties for a short time period (from one night to less than 6 months). Airbnb rentals have proven to be profitable investments. Depending on the location, investment properties can generate higher income as Airbnb rentals rather than traditional rentals.
Furthermore, these investment strategies for making money in real estate offer property investors more flexibility; they can buy investment properties for the sole purpose of renting them out as Airbnb rentals, or just rent out a room from their residential property any time they want, thus generating passive income without the hassle of owning an income property and being a landlord!
Related: The Ultimate Guide to the Airbnb Investment Property
Making Money in Real Estate without Buying a Property
Making Money in Real Estate – Real Estate Wholesaling
While wholesaling is not the first investment strategy that comes to mind when thinking of making money in real estate, it’s still a great option. The reason for this is that it allows property investors to quickly make money without spending money!
The process of real estate wholesaling is simple: the wholesaler looks for distressed sellers and convinces them to sell their property below market value, writes a contract for the deal, finds buyers, and sells them the contract. As a middleman between the property seller and the property buyer, the real estate wholesaler is paid for closing the deal. Can making money in real estate get any simpler than this? This investment strategy is attractive to many as they don’t have to actually own a rental property, thus, they’re not responsible for any repairing costs or mortgage payments.
Making Money in Real Estate – Real Estate Investment Trusts (REITs)
Another way of making money in real estate without having to actually own an income property is by investing your money in REITs. Real Estate Investment Trusts are companies that purchase and own multiple investments ranging from apartment buildings, through office buildings and shopping malls, to hospitals and large investment properties.
This is the best investment strategy for a real estate investor who doesn’t have a big capital nor the time to invest in real estate as a full-time job. Investing in REITs means investors receive a passive income in the form of dividends and they have minimal responsibilities. Moreover, since REITs typically invest in multiple properties, investors will have a diverse real estate investment portfolio!
Related: What Is REIT and Is It a Good Real Estate Investment Strategy?
Making Money in Real Estate – The Bottom Line
As previously mentioned, before deciding which one of these investment strategies is the best for making money in real estate, property investors need to take certain factors – such as location, type of rental property, and budget – into consideration. To learn more about all aspects of real estate investing, continue reading our blog.
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