When investing in real estate, you must have encountered several types of advice on social media from other investors (incl. FinFluencers). There are many effective strategies for investing in real estate, even though some may claim to know the best. The best approach for every landlord is different. Real estate investing must reflect your long-term goals, available resources, and current circumstances.
Further more, your investment strategy can and should change as your needs change. It isn’t about one investing strategy that makes your rentals successful, but rather the skills you’ve developed, the tactics you’ve learned, and the ability to pivot between different approaches when necessary.
Here are six great real estate investing strategies you can use at different points in your investing career:
- House hacking
A house hacking strategy involves buying a property, living in half of it, and renting out the other half. Renting out the property reduces your monthly mortgage payments.
Using this strategy, you can maintain a clear division between your and your tenants’ spaces in duplexes and other multiplexes. However, some investors rent out a basement or bedroom of their single-family homes.
Several reasons make house hacking a popular and widely used investing strategy. Among other things, it’s an excellent way for new landlords to transition into real estate investing. In particular, this is true if you use property management software to manage your rented unit or bedroom. During the early stages of setting up your business, the software can help you keep track of your income and expenses. Besides getting a residential mortgage, house hacking also allows you to live on the property.
As a result of this strategy, you can transition the property into a full-fledged rental in the long run.
- BRRRR deal
BRRRR investing is popular on Bigger Pockets, buying, rehabbing, renting, refinancing, and repeating. A BRRRR property is one other that may have been overlooked due to its low face value or apparent lack of potential.
BRRRR targets properties that are sound investments despite needing some work. Install hardwood flooring, add extra bedrooms, or remodel kitchens and bathrooms to increase value. Your property appraisal will improve as a result of these improvements, and you will be able to invest more money elsewhere.
- Wholesaling/driving for dollars
To capitalize on great deals, many investors use wholesale strategies. Using this strategy, you find a property that will make a good deal, facilitate a sale between a buyer and seller, and then collect the difference between the seller’s and buyer’s prices.
You must know which properties are currently on the market to succeed with this strategy. A “driving for dollars” strategy involves manually searching neighborhoods for promising properties. This consists in using popular listing sites, the Multiple Listing Service (MLS) or the Multiple Listing Service (MLS).
Wholesaling has the downside of requiring strong marketing and sales skills if you need them or are willing to work to acquire them.
- Flipping properties
Flipping houses work best when you renovate and convert them as soon as possible, and mortgage payments increase as you wait longer to sell. Like BRRRR, house flipping works best with properties listed below market value or those that can be easily improved for low costs. As a result, improvements can significantly increase a property’s value and turnover rate.
Because you sold the property so quickly, you will have higher capital gains taxes. For house flipping to succeed, you’ll also need help – specifically, a team of builders and renovators and low-cost, high-quality materials.
- Syndications
Real estate syndications are often viewed as passive investing strategies. However, syndication can result in significant profits if you make the right decisions and monitor the process. You pool your funds with other accredited investors to purchase real estate through syndication.
- Live-in-then-rent
The live-in-then-rent strategy is a modified house-flipping method. The property is usually a single-family home (SFH) that you live in initially, then rent out after you move out.
Living-in-then-renting is different from house hacking in that you do not live in the property and rent it simultaneously, and these are two separate phases. Live-in-then-rent is an excellent strategy for people who don’t want to live closely with their renters but still want to participate in real estate investing on their budget.
With so many ways to invest in real estate, designing a strategy that meets your needs may seem difficult. You can cultivate your real estate business by tailoring your investing plan to your goals.
