There’s no doubt that investing in real estate is a great way to make money in both the short and long run. Many people have made millions by joining the real estate investing business. With the new year fast approaching, you must be wondering how to invest in real estate in the new year. Well, we’ve prepared for you a list of 10 real estate strategies that we think will be suitable for investing in the US housing market. We’ve divided them into 2 categories: investing in real estate by buying investment property vs not buying property. In fact, the best real estate strategy for you will depend mostly on how much money you are willing to invest.
How to Invest in Real Estate by Buying Property: 5 Ways
Buying an investment property is the most direct and hands-on way to invest in real estate. Needless to say, this requires you to have enough money saved in order to be able to finance your investment. Here are 5 ways to invest in real estate that involve buying a property.
1) Buy and Hold Strategy
As the name suggests, the idea behind the buy and hold investment strategy is to buy an investment property and hold on to it for a long period of time. The goal is to keep the property at least until it has significantly appreciated in value and then sell it for a profit. Buy and hold is one of the best investment strategies for beginner real estate investors because it requires little experience in property investing; it mostly relies on property value appreciation. Some investors choose to rent out the property during the “holding” period to make extra money in the form of rental income. As a result, they’ll be able to benefit from short term gains through cash flow, while building wealth through long term real estate appreciation – if the buy and hold strategy is done correctly of course!
The buy and hold strategy works best in areas with high real estate appreciation rates. The hottest cities in the US for appreciation rates include Odessa (TX), Idaho Falls (ID), and Pasco (WA).
2) Traditional Rental Strategy
The traditional rental strategy is a variety of the buy and hold strategy. It involves buying an investment property with the purpose of renting it out on a long-term basis. In most cases, long term rental properties are rented out for a period longer than 12 months, with the tenants paying rent on a monthly basis. The monthly rental income which investors receive is, in fact, the best aspect of buying an investment property to rent out on a long term basis. With this investment strategy, investors are guaranteed a steady and predictable cash flow, given that the tenants pay on time. Investing in rental properties will always be a viable strategy: There will always be demand for traditional rentals as people who can’t afford to buy a home will always need a place to live in, regardless of the location and the time of year.
Investing in single family homes is the best way of investing in long term rental property. You’ll be able to produce positive cash flow pretty easily as long as you ensure that your rental income is higher than your expenses.
3) Airbnb Rental Strategy
The Airbnb rental strategy consists of buying and renting out a furnished property for a short period of time, usually anywhere between one night up to one month. Essentially, investors opting for this strategy use short term rental platforms such as Airbnb to market their property to guests who are looking for temporary accommodation. The Airbnb rental strategy has become a highly popular strategy among real estate investors as Airbnb rental properties have proved to be very lucrative and generate higher rental income than traditional rental properties. The main reason for this is that Airbnb hosts are able to adjust the nightly rate according to peak periods, and so they can charge a higher rate per night. However, it must be said that the success of an Airbnb investment property depends on many important factors such as location and marketing efforts.
Airbnb investing seems like an excellent idea. US housing market trends point to a strong bullish rally in the Airbnb rental market.
4) House Hacking Strategy
House hacking is another investment strategy that’s perfect for first-time real estate investors. It consists of buying a duplex, triplex, or any other multi family home in order to live in one of the housing units while renting out the rest. The main idea behind house hacking is that other people pay for your housing expenses, and so, if done right, you get to live in your home for free. Multi family homes generate a higher rental income compared to other types of investment properties, which makes them the best option for real estate investors who are looking to grow their investment portfolio rapidly.
If you’re interested in knowing how to invest in real estate through house hacking, read this blog: How to Live for Free with the House Hacking Strategy.
5) Fix and Flip Strategy
Fix and flip real estate entails buying a property that’s in poor condition, fixing it up to a good condition, and selling it to another real estate investor or homebuyer. The basic principle of flipping houses is that you make a profit from selling a renovated property for a much higher price than what you purchased it for. In fact, renovations add value to fix and flip properties and cause their price to jump – if done correctly of course! This strategy is ideal for investors looking for short-term real estate investments to quickly make money. However, it might not be suitable for beginner investors as it requires quite a bit of experience in real estate, especially in home renovation and deal negotiations.
If you want to learn more about how to invest in real estate by flipping properties, read this blog: Real Estate Investment Strategies Guide: Fix and Flip.
How to Invest in Real Estate Without Buying Property: 5 Ways
Now, let’s be real. Not everyone is lucky enough to have readily available cash and can afford to buy a property. If you’re wondering how to invest in real estate with no money, you might want to take note of the following investment strategies. Making money in real estate does not always require spending huge amounts of money; there are many different opportunities to invest. Here are 5 ways to invest in real estate without actually owning investment property.
1) Real Estate Investment Trusts (REITs)
One way you can invest in real estate without actually having to buy a physical property is by investing in a real estate investment trust (REIT). A REIT is a company that owns, and in most cases, operates income-producing real estate. These may include both residential real estate and commercial real estate properties, such as apartment buildings, single family homes, hotels, office buildings, retail space, or warehouses. Investing in REITs means investing as a shareholder, and not as an investor with direct responsibility. This investment strategy allows investors to earn a share of the income produced, which in turn will bring them dividends in the short run. Significant return on investment is possible in the long run, once they sell their share.
How to invest in real estate investment trusts? Well, if you’re a new real estate investor, it’s recommended that you invest in publicly traded REITs that you can buy from an online broker.
2) Real Estate Partnerships
A good way to invest in real estate without having to spend huge amounts of money is through real estate partnerships. A real estate partnership is when several investors team up to invest in real estate projects. An agreement is made between the different partners so that each one takes over different responsibilities. Each partner brings something to the table, whether it’s access to capital or market experience. And in the end, the profit is shared between everyone. This strategy is ideal for those who don’t want to be actively involved in the whole process of investing in properties, but still want to have real estate added to their investment portfolio. Additionally, investing with a real estate partner can provide you with the resources you lack. If, for instance, you don’t have funds but have real estate investing skills, then you can partner with an investor who has the funds.
If you want to invest in real estate through a partnership, you should make sure to choose the right partner, have a solid business plan, have a clear partnership agreement and use the right real estate investment tools.
3) Real Estate Syndication
Real estate syndication is a specific type of real estate partnership that consists of two main parties. The first party is the syndicator, who plays the leading role in a real estate project: this individual is in charge of finding a property, raising the necessary funds, acquiring the property, and doing the day-to-day management. The other party is the investors. These individuals invest their money in the project, and as a result, they earn a percentage of the project’s profits. They basically get all the benefits of property ownership, without having to own a property. This investment strategy is perfect for those wanting to invest in real estate without doing too much hands-on work of owning property. In fact, the role of the investor in a real estate syndication is a passive one; it’s only the syndicator that’s actively involved in the project.
If you want to know more about how to invest in real estate through a real estate syndication, read this blog: What Is Real Estate Syndication and How Can You Take Part In It?
4) Real Estate Crowdfunding
Another answer to the question “how to invest in real estate with no money” is through real estate crowdfunding. It’s a way of raising capital for a real estate project through the use of social media sites. This allows projects to be advertised to a large number of investors who can then get together and pool their money in these projects. Each investor contributes a small sum of money, and in the end, they all share the profits made. Real estate crowdfunding is particularly popular among those getting started in real estate because it allows them to invest in real estate with a very small amount of money – and we mean something like $50 sometimes! Another reason why this strategy is favored among beginner investors is the fact that it does not require them to have a real estate network so as to find good real estate investment opportunities.
The best real estate crowdfunding websites include PeerStreet, CrowdStreet, Fundrise, and Realty Mogul.
5) Real Estate Wholesaling Strategy
Real estate wholesaling is another investment strategy allowing you to invest in real estate without owning investment property. It consists of finding a property for sale below market value (such as a distressed home), putting it under contract, and finding a buyer to whom to assign the contract. The wholesaler is then entitled to a share of the selling price. In other words, the wholesaler makes money by acting as a medium between the seller and the buyer. Wholesaling is one of the best ways to make quick money in real estate and is perfectly suitable for novice investors with a limited budget. All the money you’ll need to spend is for marketing the property to potential buyers. However, to be successful with this investment strategy, you need to know how to find good real estate deals. For this, you’ll need to have good networking and good marketing strategies in order to easily find potential sellers and buyers.
There are a number of online sources that you can use to find properties for wholesaling in your area. Some of the best wholesaling websites include Craigslist, FSBO, and HomesByOwner.com.
Conclusion
How to invest in real estate? The first step is to weigh whether you’ll want to invest by buying property or without buying property. Then it’s up to you to decide which real estate investment strategy suits you best.
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