Smart Real Estate Investment Strategies for Investors

  • Author: Shreshta Chillappagari
  • 5 min read
  • November 16, 2020
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Real estate seems complicated from a beginner’s frame of reference as it requires skill and knowledge to make the right investment. But, there are multiple Real Estate Investment Strategies that you can use to invest in real estate that are viable for beginners too.  

There is the least of the land for all the population to live on. It means an ever-increasing demand for land. Hence, investing in real estate seems a great deal if you are ready to invest and reap benefits. 

Educating yourself with a few strategies before getting started can help you make the right investment decisions. Looking into pro’s and con’s of each strategy and analyzing it, you can find a suitable strategy for yourself.

Best Real Estate Investment Strategies 

  • Fix and Flip

Fix and Flip is a strategy to buy a house and repair or renovate it to sell it at a higher price. Generally, flippers resell the property in six months to one year. Flipping seems to be a suitable option if you do not wish to take on the long term responsibilities. 

Well, this is not as simple as it may sound. Because there is a chance of receiving a lesser or no profit margin if the property involves high repair costs, it requires skill and knowledge to deal with a project like this in a short period of less than a year. If you are on a lower edge in marketing, this strategy is not for you. Nevermind, you still have many more on your way.

So, how do you decide on buying the property?

There is a general rule in flipping known as the 70% flipping rule. It states that you must not pay more than 70% of the property after repair value i.e., ARV. You must use a realistic estimation of property ARV to ensure the right profit margin.

Having said this, the 70% rule does not guarantee the profit as the property may subject to market risks.

  • BRRRR Strategy

BRRRR stands for Buy-Remodel-Rent-Refinance-Repeat. To start with, you buy a property with repairs for a price less than full value. You may use short term cash or financing to buy it. You then renovate it and get the repairs done. Then rent the property, and later you may refinance with a long-term mortgage. 

This way, you may start with small cash and end up pulling out the capital retaining your property. This is one of the safest strategies as it involves lower potential risks. You may use this strategy if you wish to invest in the long term.   

  • Rental Properties

The tag of the landlord sounds excellent! This is also called to buy and hold a property investment strategy. When you own a property and rent it, it is the easiest way to generate regular income. It has its share of constraints in the form of maintenance and repairs. You must set aside a sum for maintenance and repair works, handle the tenants, and have a regular inspection to avoid any property damage. Vacancies are the potential risk factors for rental properties, and finding a tenant can be a monumental task.

Keeping these in mind, you may use this strategy if you want to generate a regular income. 

Do you want to earn without owning a property? Here are some exciting investment strategies for you!

  • Hard Money Lending

One way to strategically invest in Real Estate without actually buying it is by becoming a short-term lender. You can lend loans to investors who buy fix-and-flip properties or rentals. Usually, these loans are lent at high-interest rates and involve upfront fees. The upfront fee is the borrower’s fee to the lender as consideration for a new loan. 

This is a profitable investment but involves risks equally. If you are looking for a hassle-free approach to real estate investment, this is for you. You need not maintain any property. You do not require marketing skills too. But, if you are a new entrant into this market, you would want to keep your hands off, as this strategy requires some experience with Real estate investing.

  • Crowdfunding

Crowdfunding is a new approach where many people pool their money to invest in a property. Several people can come together and invest their small sums through a common platform to enjoy the returns without any hassle. A manager maintains the property, and you would have to do nothing but enjoying the returns.

As an investor, you get your share of income and the fractional ownership. Any potential losses are also divided among the investors. You hence have reduced risks. This is for you if you are looking for a safer investment with less skill.

Mostly, crowdfunding is done online, and you can start with a meager amount. Assetmonk is an innovative platform that offers the best deals for customers in the field of crowdfunding.

  • Discounted Note Investment

One of the common strategies similar to participatory notes in Foreign Portfolio Investment is Discounted Note investment. You can buy notes at discounted rates from the owner. After maturity, you get the face value of the note that you bought for a discounted rate. This is the profit that you would be earning.

The advantage of investing in discounted notes is that they are not a volatile instrument. You have a guaranteed profit. This works well for beginners, as they hardly need any skill.  

The risk of default is high in the case of corporate-issued notes. If you are starting with your investment, you may go for government-issued notes for high credibility. 

  • REIT

Real Estate Investment Trust is a corporation, trust, or association that buys a property from investors’ shares. When you buy shares of the company, the company pays you back from its earnings in dividends. 

It ensures your profit as the company invests in diverse investments. You earn as dividends and also when the investment value appreciates. It is easier to buy the REITs than buying the property. They have high transparency, and this increases credibility. The most significant advantage of investing in REITs is the lower liquidity risk. It diversifies your risk and ensures safer returns.

REITs have outperformed BSE with 14% ROI, states a report. REITs are an investing strategy suitable for all types of people, whether experienced or new. If you are a small investor, then REITs are a boon for you. They have guaranteed profit with a small sum of money.  

Investing in real estate may not fetch your profits in a flash period. It requires time, effort, and some strategy to reap high profits. Above mentioned are a few you could look into. Every strategy mentioned above may not work for everyone as the preferences differ from person to person. You can evaluate the above strategies and analyze for yourself what works best based on your investment objectives.

Assetmonk is an online platform in real estate that helps you bag the best deals and renders services throughout your investment journey.

Real Estate Investment Strategies FAQ's

There are different Real Estate Investment Strategies like BRRRR, Buy-and-hold, i.e., rental properties, Fix-and-Flip, and many more. They are how you may invest in real estate and earn profits.

Yes, there are investment strategies without owning a property. They are crowdfunding, Hard money lending, discounted note investment.

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