Short-Term vs. Long-Term Real Estate Investment Strategies

When it comes to real estate investment properties, there are two main strategies that investors can employ to gain experience and attain wealth. The two different paths to success include a short-term strategy as well as a long-term option. The short-term strategy called Purchase and Rehab, otherwise known as fix-and-flip, is great for quick money and quick transitions to the next property. The alternative is a long-term rental option that often includes a 30-year loan program and allows for passive income.

To be clear, there is no right or wrong answer when it comes to selecting between these two strategies. Both have proven to be avenues to success and are sustainable in the real estate investment industry. Here, I will break down the advantages of both and let you decide which is right for you.

Short-Term Strategy: Fix and Flip

For the quickest way to increase your capital and be able to start buying up other properties as soon as you would like, the fix and flip strategy is a sure-fire way to do exactly that. Besides the financial benefits, there are other skills you can pick up with this strategy, such as time management, home improvement, and relationship building that are all beneficial skills to have in this industry.

When it comes to financial gain, the fix-and-flip plan is ideal. Within 8-12 months you can easily make a five figure pay day, maybe six depending on the value of the property and the amount of work you are willing to put in. These pay days are a very attractive part of the industry, and a lot of people get into the business for exactly that reason.

Time management is a skill that translates in all aspects of your life but honing it during a fix-and-flip project over the course of a 12-month loan is a key to success. You can easily learn how long certain projects will take, what projects are worth your time, and what projects are best when it comes to increasing the profit on your investment. Most fix-and-flip loans can be completed before 12 months as well. If you can establish a plan and a rhythm to all the necessary fixes that you need to make to a property you can move on to your next flip as soon as you want.

At RCN Capital, we have no prepayment penalties on the fix-and-flip loan product which encourages fix-and-flippers to complete projects quicker and make more money.

Whether you want to do the rehab yourself or hire a contractor you trust, you can learn so much about the home improvement process. Everything from painting the walls to replacing the floors or redoing the kitchen can be learned with repetition or from a contractor you can rely on.

The final piece of this puzzle that makes this fix-and-flip process so appealing is the ability to build relationships that set you up for future success. I already mentioned contractors, but lenders play a big part in this as well. RCN Capital strives for top-notch customer service and appreciates repeat business. You can familiarize yourself with a lender’s rates and leverages and knowing what to expect every time you pick up the phone to speak with a lender is a big plus. RCN Capital offers very competitive rates and leverages in the industry as well when it comes to fix-and-flip loans. The rates start at 7.74% and we can offer up to 90% LTV and 100% of the rehab costs in most cases.

Long-Term Strategy: Buy and Hold

The alternative is the exact opposite of the fix and flip model but can still be just as effective. The long-term rental (30 years) is an effective way to build passive or secondary income and can require much less work up front than your typical fix-and-flip project. At RCN Capital, we require that these long-term loan properties be in rent-ready condition. This means that no funds can be allocated for rehab, but at the same time this allows the investor to start making money immediately once they have a tenant in place.

There are also opportunities to pick up useful skills with this strategy as well. Property management, market research, tenant selection and professional relationship building are all skills that are learned in this line of work.

Property management, or becoming a landlord, is an important skill that will be learned if you choose the long-term rental strategy. This starts with choosing a tenant that will be the right fit your property. You will need to gauge just how hands-on you need to be depending on the property and tenant. It is a delicate balance, but mastering property management can go a long way to making that second source of income. Once you get comfortable managing one property, you can move on to two or three. Once you get comfortable managing a single-family property, you can move on to duplexes, triplexes, or multifamily units. This strategy and skill will allow you to multiply your income, and this is where you can start making generational wealth with long-term rentals.

Market research is another useful tool to master and can help you make more money with your investments. Selecting the right market, then finding the right property and setting your rent at the right price to make it enticing while still ensuring profit can sound overwhelming at first, but with the proper research and right guidance you can figure out the right numbers to make the most profit possible. Doing this with multiple properties as well makes the concept seem less daunting and you will be able to do it with ease before you know it.

As always, building professional relationships is key when it comes to long-term rental investment properties. Of course, a positive relationship with your tenant(s) is a plus but so is forming that relationship with a lender. RCN Capital will be there to answer any questions regarding this strategy, and we will always work towards having the most appealing rates for investors. Currently, RNC Capital offers rates as low as 3.85% and can go up to 80% LTV on these long-term loans.

Either way you go about your real-estate investment strategy there is a path to success. Just be certain you are picking the right strategy for the right property, and more importantly the right strategy for you. What are you looking to get out of real estate investing? What strategy works better for the personality you have? Once you answer these questions you can start investing and start making money.