Real estate investing continues to be one of the best ways for individuals to build wealth and a solid investment portfolio. There is solid earning potential with most types of real estate property, and appreciation makes it a great hedge against inflation. However, there are many different types of investment strategies that one can use to build wealth with real estate. It helps to know about these different strategies, and choosing a specific one can set you in the right direction and increase your chances of making a great return. Continue reading to learn about 5 of the most popular real estate investment strategies.
Flipping is one of the best-known real estate strategies, and you’ve probably seen a show or two on HGTV about how lucrative home flipping can be. Flipping is also great for beginners since it’s a concept that’s easy to understand. Put simply you acquire a home in need of renovation, invest in key areas to add value, and then resell the home for a profit. It’s also the one of the fastest real estate investment strategies, with experienced investors able to complete a home flip in less than 3 months. After successfully flipping a home you can use those funds for other investment strategies, or just keep flipping for a sizeable return each time.
Long-term buy and hold
Another common real estate investment strategy can be referred to as the “long-term buy and hold”. With this strategy, your goal is to add valuable rental properties to your portfolio and keep them for regular steady income. Eventually, you’ll be able to use the income from your portfolio to continually acquire new properties in a sort of snowball effect. You may also want to consider investing in new construction with this strategy. Newly constructed homes are often worth more than the materials and labor used to build them, and since they are new they will likely fetch a high monthly rate which means a great return for you.
Short-term buy and hold
A slightly more complex strategy than the long-term buy and hold is it’s short-term variation. In this strategy, you acquire a property and hold onto it for a shorter period of time, usually about two years, before selling it for a profit. During this time you can rent the property out to help recoup some of your acquisition costs. This strategy is great because you can capitalize on gains from appreciation, and you will receive rental income for a period of time. You can also choose to perform renovations on the property before selling to take your gains even further.
BRRRR stand for Buy, Rehab, Rent, Refinance, Repeat. This method combines the benefits of flipping and long-term rental property since you can gain value from performing renovations but you will also hold onto the property afterwards for consistent income. It allows you to add rental properties to your portfolio at a much faster rate than saving for down payments, but it does require you to rehab every property you purchase. Refinancing will give you the difference in value that you’ve added to the property, which you can then place as a down payment on another property, all while you receive rental income.
The final type of investing we want to discuss today is owning vacation rental property. This method has become more popular in recent years due to apps like Airbnb and Vrbo. Vacation rentals have higher margins than other types of investments, but also require more active management in the form of maintenance and scheduling bookings. However, you’re able to generate the revenue of a typical single family rental in as little as a weekend. There are pros and cons to this type of investing, and you should certainly do research to find a location that will perform well before purchasing a home for this strategy.
The best way to save on your next investment is to obtain financing from a trusted real estate lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are an investor looking to finance a property, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.