Through the ups and downs of any market, investors must go with diversified strategies that ensure long-lasting returns. With the development and growth of the real estate market, it became easier to spot the most lucrative opportunities in the market to exploit. Making money in real estate will never be a thing of the past for as long as land exists. The real estate business has proven to bounce back after every setback and has become even more lucrative for investors in the past few decades. So, how can you find the best investment strategy to dive into the real estate world?
Knowing what investment strategies there are can make things a lot easier for beginner real estate investors. Let’s begin with defining an investment strategy.
Investment strategy defined
An investment strategy is the ultimate guide that investors set to define rules, expected outcomes, investors goals and the risk involved. All types of investors must have an investment strategy in order to use as a reference with their investment portfolio. Knowing the best investment strategy for you is not that difficult if you take the time to know what others have tried and what worked for them before.
Why should real estate investors define a clear investment strategy?
- Setting a reference point to turn back to when making investment decisions.
- Defining an investment objective.
- Strategizing investment to fit an overall investment portfolio.
- Reduce the risk of the investment choices.
- Establishing a long-term vision through short-term goals.
These are some of the reasons that push real estate investors into defining an investment strategy in today’s overcrowded investment market.
Knowing what types of investment strategies have worked for others can make the road a lot easier for you. There are a few proven to be successful real estate investment strategies to choose from. However, every real estate investor must find the best investment strategy that fits his/her personality and needs.
What are some different types of real estate investment strategies?
Airbnb investment strategy
We chose to begin our list with Airbnb rentals as it is one of the newest real estate investment strategies in the market and has proven to be the best investment strategy for some real estate investors. With the rise of Airbnb, a new generation of investors and income properties was born.
Airbnb rentals are vacation rentals that people use when they are away on vacation or business trips. Short-term rentals are charged at a nightly rate which can raise the rent compared to traditional rental properties.
Buying an investment property to use as an Airbnb rental may not be for everyone. Investors must manage their income properties with great detail on a daily basis to ensure guest satisfaction. Keep in mind that not all local regulations allow for renting out on Airbnb. We recommend renting out a room in your home for at least a month on Airbnb in order to get the hang of it and get an encompassing idea of what Airbnb rentals require.
Related: Short-term Rentals Real Estate Investing: How to invest in Airbnb.
Buy-and-hold investment strategy
The entire concept behind buy-and-hold as an investment strategy lays on appreciation. If you buy a property and own it for a number of years, the appreciation on that property or land is ought to get some cash in your pockets. Buy-and-hold has proven to be the best investment strategy for some real estate investors. However, doing the whole buy-and-hold strategy requires effort and loads of it. Ensuring that the buy-and-hold property is a positive cash flow property is necessary to the longevity of this type of investment strategy.
Buy-and-holds may not be the best investment strategy for all real estate investors, but for whoever ventures into them, they can be lucrative in the long haul as they usually generate a passive income that is sufficient enough to cover costs. Such properties can range from multi-family homes to single-family homes or apartments and many investors are even purchasing buildings as buy-and-holds. This brings us to the next investment strategy in real estate: traditional renting.
Long-term rental strategy
Whether you’re a real estate investor or just a regular member of society, you must have come across a landlord or two. Landlords sure make it look easy, but there’s a lot more to owning a long-term rental than cashing rent checks. Long-term rentals fall under the buy-and-hold category as they can be a great way to ensure a steady rental income.
Knowing how to invest money in real estate is not the only factor in your success. Real estate investors must know how to make money in real estate through their investments while managing their income properties and ensuring their tenants’ satisfaction. Long-term rentals can be a great method to reduce vacancy in your property while benefiting from the rental income.
Related: Long-term Rentals: Why You Should Invest in Them.
Fix-and-flips have grown in popularity in the past few decades mainly due to mainstream media. TV shows and online forums are always talking about how you can generate a substantial revenue through fix-and-flips as a form of real estate investing. It’s considered the best investment strategy for investors who have expertise in construction and home improvement.
You may not have to come up with a rental strategy for your investment property when flipping properties, but many other problems can arise. Many inexperienced real estate investors have gone into fix-and-flips and couldn’t make it in the field as it requires many skills to get a property all the way to the finish line.
If you are looking to venture into real estate investing through fix-and-flips, we recommend that you talk with experts in the field to get all the information you need about this investment strategy and maybe consider partnering with one until you know the ins and outs of the work.
Related: 5 Tricks to Save on Fix-and-flips.
What’s the best investment strategy for you?
Deciding on the best investment strategy for you is not an easy task to achieve. We like to think of it as an ongoing process that requires the real estate investors to assess risk and act upon it to make revenue through wise investment decisions. Real estate investors must find low risk investments to pour their hard-earned cash into.
Many real estate investors are utilizing technology to make solid real estate investments and choose investment strategies that offer the best fit. Consider using Mashvisor’s analytics to help you choose the best investment strategy that fits each individual property. Mashvisor offers an investment property calculator to help investors make the best investment decision they possibly can.
The best investment strategy for one investor may not be the best fit for another. The beauty of investing is finding your own path to financial freedom and making the right decisions to ensure achieving it. Many real estate investors are opting for a diversified investment portfolio that encompasses many investment strategies. Through diversified investment portfolios, real estate investors can be armored against any type of market fluctuations or changes. If you have any more insights about investment strategies that worked for you, please share them in the comments section.
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