It’s no secret that real estate investing is one of the best ways to build wealth and diversify your investment portfolio. In fact, for most millionaires, real estate represents a significant portion of their wealth. Moreover, real estate is now a more diverse industry and presents limitless opportunities to potential investors to make substantial amounts of money. Basically, everyone can make money in real estate.
While there are many types of real estate investment strategies, not all are going to be good for everyone. Actually, many new real estate investors have little success or end up losing their hard-earned money because they choose the wrong real estate investment strategy. So, what’s the best way to ensure that you get off to a good start as a real estate investor? How do you know which real estate investment strategies are best for you?
If you are thinking of investing in real estate but aren’t sure which road to take, this article is for you. Read on to learn how to pick a real estate investment strategy.
Related: How to Start a Real Estate Investment Business in 5 Steps
How to Choose the Right Real Estate Investment Strategy for You
1. Know Your “Why”
The first step to deciding which real estate investment strategies will be the best fit for you is to clearly define your goals. In other words, you should figure out your “why”. What exactly do you want your real estate business to help you achieve? Are you looking to create passive income for retirement? Do you want to make more money to afford a family trip? Or do you want to be your own boss and have more flexibility?
When defining your goals, you should avoid vague generalities like “to earn more money.” Make sure they are specific enough. Not all real estate investment strategies will work for your specific goals. Moreover, having clear goals will help you avoid procrastinating and make it easier for you to stay focused even during tough times. It is easy to get sidetracked if you don’t have conviction in your actions.
2. Educate Yourself
Once you have identified your purpose for getting started in real estate investing, you want to learn the basics of real estate investing and the different real estate investment strategies. Like all investment paths, each real estate investment strategy will have its own degree of risk and reward. However, conducting thorough research will help you make the best possible decision.
Make sure you know the ins and outs of each strategy. Learn about the duties and responsibilities associated with each strategy, minimum capital requirement, time commitment you need to make, required skills, etc. Gather as much information as you can. You don’t want to end up in an unwanted situation because of your ignorance.
You can gain insight into different real estate investing strategies through a number of sources including real estate books, blogs, podcasts, YouTube videos, seminars, etc. Networking with experienced real estate investors in various fields is one of the best ways to fast-track your learning as a beginner real estate investor. You’ll be able to hear and see first-hand the pros and cons of different real estate investing strategies.
3. Put the Pieces Together
Once you have defined your purpose for investing in real estate and understood the different real estate investing strategies, the next step is to determine the right strategy to pursue. While it’s definitely possible to make money with any real estate investment strategy, the reality is that not every strategy will work for you. The best real estate investment strategies will vary from person to person. Therefore, it’s better to play it safe, particularly if you are still new to the game.
So, what is the right investment strategy for you? This will depend on a number of factors. Like a puzzle, until you have put all the pieces together, you won’t be able to see the whole picture.
Potential real estate investors should consider the following before choosing a real estate investment strategy:
Long-term goals
As we have discussed above, what you want to achieve by investing in real estate is key to picking the right strategy. You have to align your investment goals with the right real estate investment strategy.
Time constraints
Before you commit to a real estate investment strategy, make sure that you factor in the time commitment it requires. Do you have time constraints that may hinder you?
Skills
Do you have the skills needed to effectively invest in real estate using the strategy? If you don’t, can you easily acquire them or outsource?
Risk tolerance
Are you comfortable taking on the risks associated with the real estate investment strategy?
Financial situation
Do you have access to capital needed to finance your real estate business if you pursue the strategy?
After considering all the above factors, you’ll find that some real estate strategies will be more viable for you than others. Choose one based on your long-term goals and current situation.
As a beginner, you shouldn’t try out multiple real estate investment strategies at once. Remember, a Jack of all trades is a master of none. Pick one strategy that best fits your financial goals as well as your current situation and take action. Be comfortable with being a beginner but take measures to become better in that field.
As you progress, your real estate investment strategy will become clearer and you’ll learn how best to boost your return on investment. With more experience, you’ll be able to try out new property investment strategies.
Overview of the Top Real Estate Investment Strategies in the US Housing Market
Now that you know how to pick a real estate investment strategy, let’s look into some of the best real estate investment strategies for beginners and when to consider them:
Real Estate Wholesaling
If you have limited funds and want to invest in real estate, real estate wholesaling could be a great choice. However, to be successful with this strategy, you’ll need to spend a lot of time networking with investors and looking for properties that are below market value.
This is one of the best real estate investment strategies for beginners who want to generate income quickly and have no time constraints but are financially strapped.
Fix and Flip
If you are comfortable with active income investments and have access to capital, the fix and flip real estate investment strategy will typically generate a higher return on investment than wholesaling. However, this strategy is riskier and would require you to have some home improvement skills or at least be able to find (and pay) a trusted contractor.
Related: How to Flip a House in 6 Steps
REITs
If you are looking for passive income investments, two popular strategies include investing in rental properties and investing in REITs. With this strategy, you can invest in real estate without actually owning a physical investment property. REITs are also popular because one needs a relatively small cash investment to get started.
Related: What Is REIT and Is It a Good Idea to Invest in One?
Rental Properties
An investor can also generate passive income through the real estate rental investment strategy. This is achieved by investing in rental properties with positive cash flow and hiring a rental management company.
If you are looking to invest in residential real estate in the US housing market, be sure to use Mashvisor to find properties with a high return on investment. Mashvisor’s tools offer accurate and up-to-date real estate data and analytics to make buying investment properties easier and faster. It even has a free Airbnb calculator to help you estimate a specific property’s potential Airbnb rental income and occupancy rate.
Related: What Makes a Good Rental Property?
The Bottom Line
With an increased number of proven methods for making money in real estate, starting a real estate investment business is more accessible than ever. From real estate wholesaling and REITs to the buy and hold real estate investment strategy combined with renting out, the real estate investment strategies are numerous. However, finding success in real estate requires that you choose the right strategy for you. No one particular strategy will work for everyone. The key is to pick real estate investment strategies based on your specific financial goals and your current situation.