Investing in real estate does not necessarily mean owning a rental property and making a profit from collecting rental income. On the contrary, with short term investment strategies, a real estate investor can make quick money without having to hold investment property. To learn more about the best short term investments in the real estate market, continue reading this blog.
What Are Short Term Investments?
When it comes to real estate investing, investors are faced with two options- a long term investment strategy vs. a short term one. A long term real estate investment entails purchasing a real estate property with the intention of renting it out for a long period. Investing in real estate investments trusts – REITs – is also a long term investment strategy.
On the other hand, opting for a short term investment strategy means that the holding period of the property is much less (or non-existent) and the ability to make a return on investment is faster and a bit higher. The best short term investments include real estate wholesaling, fix and flips, and bird-dogging.
The main idea here is to make a profit out of the real estate investment in the shortest time possible. Many real estate investors want to invest in real estate without having to manage properties or deal with tenants, and that’s what the best short term investments offer!
Short term investing is a great strategy for properties located in areas with stable or low projected increases in value. This is not a rule, but in high appreciating real estate markets, investing in long term investments brings in more profit.
The 3 Best Short Term Investments in Real Estate
#1 Bird-Dogging
Bird-dogging is a term in real estate used to describe those who scout for distressed or discounted real estate properties that have a value below the market price. A “bird dog” would then match the property seller with other real estate investors, making money by charging a commission fee.
Bird-dogging is considered to be one of the best short term investments because it is safe- you are not risking your own money. The key to success here is being able to locate discounted real estate properties and having a good real estate network of both buyers and sellers.
Related: How to Build and Maintain a Real Estate Investment Network
#2 Real Estate Wholesaling
Real estate wholesaling is similar to bird-dogging but differs a little. Let’s see how. Just like bird-dogging, a real estate investor finds a distressed property listed under market value or negotiates a good price with the property owner. The property is then put under contract while you look for another interested buyer.
Profit is made by charging the new buyer a wholesaling fee, which is basically what you earn for finding the property and negotiating a deal with the property seller.
To understand more how it works, consider the 3 parties in a wholesale real estate deal. You are the wholesaler, X is the property owner, Y is the property buyer.
1. First you negotiate a deal with X and put the investment property under contract without paying any of your own money.
2. You find an interested buyer Y and charge him/her a wholesaling fee
3. Y buys the property from X.
Real estate wholesaling is considered to be one the best short term investments because you don’t need money to do it, and if done correctly, you can make thousands of dollars per month without risking your own money.
However, like all short term strategies, real estate wholesaling comes with high risk. Backing out of a contract for not finding buyers can lead to penalties if specified in the contract. Furthermore, you risk harming your reputation among local real estate investors.
#3 Fix and Flips
You’ve probably seen it on TV a million times. Fixing and flipping is all about finding a distressed property, renovating it, and then selling it for a higher price than it was purchased for. While this short term investment strategy requires funds to buy the property and renovate it, it can be surely turned into a profitable business that brings in a lot of money in a short period.
To become a successful real estate flipper, you first need to develop an eye for finding properties under their market value and have basic knowledge about renovation costs. Being able to accurately estimate renovation costs is a tiebreaker when it comes to making a profit or breaking even in a fix and flip project.
Related: How to Make Money Flipping Houses – Tips for Maximum Profits
Find the Best Short Term Investments Using Mashvisor
In order to succeed in short term real estate investing, it is important to learn how to find the best short term investments that are available in the market. Mashvisor provides real estate investors with multiple services that could be useful when looking for the best short term investments in your area.
The property finder tool from Mashvisor uses machine learning algorithms and AI technologies to help you find investment properties based on your own search criteria. With the property finder tool, you can look for properties that are listed below market value that can be suitable for a fix and flip real estate project or a wholesaling deal.
Related: Mashvisor: The Best Rental Property Calculator You Could Ask for
The investment property calculator is another tool from Mashvisor that can be useful for short term real estate investors. One of the special features of this calculator is the real estate market analysis or neighborhood analysis. This feature provides you with neighborhood-level real estate metrics such as average price per square foot and property types. Such data is useful when you intend to go for the best short term investments.
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