The real estate investment business has always been in the limelight for a long long time. It has often been compared with other types of business practices and it has so many advantages that place this business above many other options. For example, if you talk about investing in stocks or shares then risk attached to investing in stocks is very high as compared to real estate investing. Moreover, the rate of return is also higher in investing in real estate as compared to investing in stocks. In addition to that, real estate investing is considered as much safer than investing in stocks. Past trends clearly state that real estate has mostly received appreciation in the values as compared to stocks and shares. Long story short, real estate is considered as a safe and secure kind of investment.
Now, the most important thing you need to know either you are investing in stocks or real estate investing, you need to make a proper and researched base strategy. Everything that is based on a well-compiled strategy has greater chances to succeed. A well organized real estate strategy is as important as any other thing in this business. This article will focus on some real estate investment strategies that will help you to understand what kind of investment is real estate and how to make money with real estate investing. Before moving on, let’s just keep in mind that these real estate investment strategies are focused on residential real estate.
-Purchase and hold: Buy and hold is one of the long term real estate investment strategies. Just buy a property and rent it out. Now, one thing must be kept in mind that while buying a property, its location is very important. Investment is made with the purpose of earning profit and it can only be earned if the property is at the right location. There are several benefits to this approach. One, your property keeps piling up appreciation over time. For example, you buy a house worth 100,000$ and you hold it for let’s say 10 years then after that time period its worth will be much more than 100,000$. Second, you can rent it out and earn monthly income as well. Rental incomes are much higher than returns on stocks and shares.
You can buy a single-family home or apartment building or you can buy multi-family homes. A multi-family home is a very effective real estate investing strategy if you want to make your property as your own residence place as well as earning a spot. You can rent out a portion of your home and keep other portions for your residence. This real estate strategy is very effective to combat the growing rate of inflation. Rentals increase every year so you can keep an eye on the inflation genie.
-Distressed or broken properties:
Buying a broken or damaged house and selling it for higher prices is another smart real estate strategy. Selling a distressed property at a higher price? Doesn’t it sound strange? Well, all you need to do is find a right and motivated seller. There are so many properties that may be damaged by floods, tornados, storms or any other natural disaster. Even there are some old and “rotten” properties that don’t look good to the naked eye.
The owners of such properties are often unwilling to spend some amount on renovation and they prefer to sell those properties at lower prices as compared to the market. All you need to do is find such sellers and you can earn handsomely. Now, profit margins can be huge in these kinds of deals. Sometimes you can buy way below market price and a little renovation can get the job done.
Furthermore, there are two different options for these kinds of deals. One, you buy a property like this and find another investor who is willing to invest. Let us say, you buy a damaged house for 100,000$ and its market value and some investor who is willing to buy it for 110,000$. You earn a profit of 10000$ even without investing a single penny. This is called a wholesale deal. The second option is buying a distressed home and after doing some repair work, selling it to an end consumer (who wants to buy for personal residence). This is called retailing.
The profit margin is higher in retailing as compared to wholesale. However, you need to be very careful and make accurate estimates for repairing or renovation while buying a distressed property. Because sometimes the repair work can be more costly and you may end up suffering losses.
One of the most common and oldest real estate investment strategies is earning money by renting out a property. This helps you earn regular income as well as incline in your property’s value. Rentals can be of two types, short term rentals, and long term rentals. Short term rentals often get you more money than long term rentals. But, finding a proper location for your property is the most important thing when you talk about short term rentals.
People love to spend their vacations or free time in calm, natural, and refreshing places. They happily agree to pay more than market rates if they can find what they need. The contracts are mostly short term ranging from weeks to a few months but you can earn some real money with short term rentals.
Long term rentals are an orthodox and most common way to earn from real estate business. These contracts are made for years mostly but it is safe and secure. However, you need to find the right and “good” tenants otherwise rentals can be distressing and result in losses or damaged property.
Two in one:
While talking about real estate investment strategies, the “two in one” method can be very handy in real estate investing. What is “two in one”? This trend is growing rapidly in so many countries. People or I must say “smart people” buy a domestic property near a commercial market and after sometime when the market expands, they rebuild their properties for commercial as well as domestic use. People make shops and stores in the front portion of their properties and keep the back portion for domestic purposes.
As we all know, commercial properties can earn you more money than domestic properties. So, having a commercial shop or store in front of your house can be very fruitful from a business point of view. More importantly, you can take care of your property with ease. Some people even prefer to stay near their business places and this can be an opportunity for real estate investors. You can rent out the domestic portion of your property to the same tenants. Isn’t it a “two in one” technique? And it is very effective while your property keeps appreciating.
Pledged or mortgaged properties:
Pledging a house or any other property against a loan is a very common practice in almost part of the world. Those loans can be for any domestic or commercial purposes. However, more often than not, people find it difficult to repay those loans and end up selling their properties at a considerably lower price than their market prices. If you are interested in real estate investing, this might be a very good option for you to buy such houses.
You can transfer the contract to your name and pay the loan as well as buy the house, or, you can directly make a contract with the seller and let him do his job. These kinds of deals can be a jackpot if you get it right because the profit margin is very high in such cases but to exercise this option, you need to have lump sum money otherwise this is not a thing for you.
Sold in auctions:
Just as we discussed above, people pledging their properties against loans and then unable to repay those loans. In many cases, banks or other lending parties exercise their right to sell those properties in auctions to recover their money. As an investor, you can participate in those auctions and purchase a property at a fairly lower cost as compared to the market price of that property because people don’t pay much for such properties and the owners don’t have much of a choice either. Just buy that property and sell it at market price without any “fuss”. Again, you must have that “lump sum” amount for such adventures. This real estate strategy more often guaranties a high profit.
Leasing a property:
There is a concept that you can not start a real estate business without money. Well, let me break it to you, you can do that. How? even if you do not have enough money to buy a property, you can exercise the luxury of leasing that property. Lease property and then rent it out. What are the benefits of this? Let us suppose, you lease a property and you have to pay installments. You rent it out a get rental. You pay that rent to settle off your installments and then at the end of the day, you will be the owner of that property with paying little or nothing from your pocket. Later, you can sell or keep it for yourself or keep earning through renting it out.
This may sound a little strange and it may not be considered as a direct real estate investing but you can still earn money with it. If you don’t want to “get your hands dirty” by dealing directly, you can lend your money to someone who is interested in real estate investing. You can have a fixed amount as a return or you can share the profits with that borrower. However, you need to be well prepared and smart for such activities.
Agricultural to commercial/residential real estate:
Is your head spinning with these words “agricultural to commercial/residential real estate”? well, this method is very common and popular in so many countries especially Asian countries. Real estate investors buy an agricultural property near populated areas. Agricultural lands have fairly lower prices as compared to commercial or residential real estate properties.
This real estate investment strategy needs patience and time. Because your agricultural property will become a residential or commercial property with the expansion of populated areas. But it will be worth waiting because you can earn even more than 500% profit in such cases. Meanwhile, you can still earn regular income through agricultural products or renting your land (property) for agricultural purposes.
These few real estate investment strategies can be very effective if you have low or no investment. But, if you have some “real money” to you want to earn bigger profits then you need some “heavy” money for real estate investing and you may need to pair up with some other investors as well. These kinds of investments have high reward ratios but it needs proper research and planning, knowledge about market trends, etc. what follows next are some real estate investment strategies for bigger investments.
The residential town is a highly profitable real estate strategy. Town builders are investors with heavy pockets and they mostly work in collaboration as these projects need a huge amount for investment. They generally buy vast areas of the property and then make it into a habitable place. How does this work? Investors buy a large piece of land and then sell it as residential or commercial properties after providing basic necessities like schools, hospitals, recreational parks in those towns or colonies.
Investors generally buy agricultural lands as they have very low prices as compared to commercial or residential properties. Then they convert that vacant land in to “city”. This can get you “boosted profits” but you need some “heavy investment” for that too.
Buying a single house can be easier but buy a building with apartments needs “big money”. If you have that big money you can earn profits with huge margins easily. You can make a pact with other investors as well because it may be difficult to arrange this much money at once. Moreover, you can share the risk factor with your partners as well. You can sell those apartments or you can rent them out and earn profits.
In some countries, investors buy such kind of properties and then use them as hostels for students and working professionals. These are the real revenue generators and can give you “huge profits easily”
The real estate business has so much to offer to everyone who is interested in this business. All you need is proper research and well planned real estate investment strategies to make money with real estate. Was this article helpful? Let us know in the comment box.