Real estate investing has long been known to be one of the most reliable sources of income since it allows you to generate a long-term profit, thereby guaranteeing your future financially. One important factor to know about real estate investment is that it can easily provide you with steady cash flow, tax advantages, and substantial appreciation, which makes it quite a lucrative business to venture into.
One of the benefits of real estate investing is that it provides you with a steady cash inflow, giving you a reliable long-term influx of wealth. Being in charge of your investment and having a say over factors like rental charges and income gives you control over your property, which in turn provides you with a sense of security and predictability. Hence, you need to have an idea of some real estate investment strategies.
Investing in real estate may be a reliable way to generate a long-term income, but it is also necessary for you to have a good strategy to manage risks with maximum returns.
Below are some proven real estate investment strategies for beginners and how. Continue reading to find out.
What are the foolproof real estate investment strategies?
Investing in real estate is indeed profitable, with the sector boasting a possible 100% ROI on investments. However, as a beginner, your knowledge of the market is limited and can result in the loss of your portfolio if you invest blindly.
To prevent making these mistakes, investment blueprints with track records of yielding ROIs exist. By employing these, you can make sure that by the time you should be receiving your returns, your portfolio exists and is thriving.
Here are seven proven real estate investment strategies for beginners like you:
1. Rental Properties
Just like every other investment strategy, purchasing an investment property requires you to have adequate knowledge of leasing properties, mortgage loans, tenant and landlord relationships, and, of course, how to manage your property. The first thing to consider, however, is the location of your property. You may get the right property but at the wrong location. A good location also means it has a low property tax, a good school district, and is closer to amenities like restaurants, and parks. The location should have a low crime rate with easy access to public transport.
2. Real Estate Investment Trusts (REITs)
These kinds of real estate investment strategies allow you to earn or generate income from real estate without buying, managing, or financing the properties themselves. They are companies that own and operate income-producing real estate across property sectors. With REIT investing, you can invest in companies by yourself, either through an exchange-traded fund, real estate crowdfunding, or with a mutual friend. There are different types of REITs that you can invest in:
- Retail REITs
- Residential REITs
- Healthcare REITs
- Office REITs
- Mortgage REITs
Before you buy any investment, always analyse it to ensure it has a good financial footing.
3. Real Estate Crowdfunding
Crowdfunding is one of the real estate investment strategies that is recommended for beginners. Because real estate investment requires you to hope the money comes in, crowdfunding gives you a different edge.
Real estate crowdfunding is an investment method where you and a group of people gather money to buy properties, with the goal being to make sizable ROIs from the venture. Unlike REITs, real estate crowdfunding allows you to start with as little as you can offer, burying the thought of “How can I start small in real estate?” Additionally, under crowdfunding, you can diversify your investment portfolio, investing in more than one crowdfunded investment at a time.
This gives your money a higher level of security, ensuring that an unprofitable investment does not leave your portfolio empty. If you have very limited resources or are too sceptical to invest in one property due to the possibility of it losing value, you should consider crowdfunding.
4. House Flipping
This kind of investment involves you buying a property and making renovations on your own before reselling for a profit. It is essentially speculative, meaning that you buy a house with the hope that when you are done with the necessary changes, it will sell. Hence you buy and invest as you would a stock. The goal of house flipping is to buy a property or a house at a low price and then increase its value through renovations. With house flipping, you shouldn’t hold onto the property for too long; this also means that you have the funds at hand to make the necessary renovations. The funds are not the only thing you need at hand, as a house flipper, you must also have a team of contractors and service providers at the ready. This is so the job can be done as quickly as possible. This kind of investment involves you buying a property and making renovations on your own before reselling for a profit. It is essentially speculative, meaning that you buy a house with the hope that when you are done with the necessary changes, it will sell. Hence you buy and invest as you would a stock. The goal of house flipping is to buy a property or a house at a low price and then increase its value through renovations. With house flipping, you shouldn’t hold onto the property for too long; this also means that you have the funds at hand to make the necessary renovations. The funds are not the only thing you need at hand, as a house flipper, you must also have a team of contractors and service providers at the ready. This is so the job can be done as quickly as possible.
5. Wholesaling
Wholesaling is a unique real estate investment strategy where you, as an investor, act as intermediaries by connecting motivated sellers with cash buyers looking to invest. You will secure a property under a contract at a discounted price and then assign that contract to a buyer for free. One of the benefits of wholesaling is that it does not require a large capital since you don’t purchase the property. It also has a shorter turnaround compared to other estate transactions. The risk of wholesaling is relatively minimal, and although it has a small profit margin compared to the others, a quick turnaround in wholesaling will make up for the difference.
6. Real Estate Notes
These types of investments are also known as mortgage notes or promissory notes. They represent a debt being owed on a property. This mortgage note is tradable and it allows the original lender to sell it to another arty, thereby transferring the right to collect payments on the said property. It provides a structural framework for the repayment of funds and then establishes the rights and responsibilities of both parties involved. One of the benefits you stand to gain with real estate notes is its potential for a passive income. If you hold a real estate note, it means that you can enjoy a consistent inflow of cash without being responsible for the management of the property. It is fixed and predictable, and this makes it appealing if and when you are seeking a more secure investment plan.
7. Tax Liens
This kind of investment is not for everyone, it is for investors who are conservative and prefer to make a profit through investing without so many risks. A tax lien certificate is when you place a claim on a property with a lien on it because it has an unpaid property tax. This is generally sold to investors through an auction process. The return of tax liens is significantly higher than the other types of investment because they are brought on by the high state-mandated interests. Buying a tax lien can be a good form of investment. It gives you the avenue to spread your money around and buy multiple certificates at a low value. The rates of returns are consistent, that is compared to the rest and you do not have to worry about the fluctuations in the market. You should also know that the income for a tax lien is subjected to you gaining interest on a tax lien certificate.
You should know, however, that there is no single best type of real estate investment to start as a beginner, but REITs (Real Estate Investment Trusts) offer you ease of entry into the world of investing; they are quite diverse since it expose you to a variety of real estate investments by buying funds with interests and also will provide you with a potential income with minimal risks.
Conclusion
While these real estate investment strategies look good and profitable, it may be quite hard for you to choose one when investing. This also means that you should be ready to do your research, and so seek advice from those who have been investors before you. You can also speak to a financial advisor if you need help in selecting and managing your investments.
You should also know that each of the real estate investment strategies explained above comes with its own set of rewards and risks, so you will want to have a thorough understanding of all.
To be able to make profits with any form of investing, you must always have your funds at the ready, calculate your risks, and make sure you make enough profit while at it.