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The best real estate investment strategies every investor should know
by Admin Tue Feb 13, 2018 11:23 am
As a beginner, you most certainly lack the knowledge of how to master these investments, but as the time passes, you will certainly become more familiar with various strategies that experts use. These paths have been tested before by thousands of investors and their success is the proof that real estate investments can turn into flourishing businesses if administered properly. Below we have some of the most efficient real estate investment strategies that have proven their success over and over again.
The fix and flip approach
This strategy is quite of a popular one, many television shows featuring such transformations. This approach means that you buy a property at an accessible price, bring some improvements and renovations, as needed, and then sell it for a higher price. The complexity and costs of these renovations may vary from complex ones to a simple paint job or wallpaper replacement. Many investors choose to manage these “fixes” themselves, in order to save some generous amounts of money on professional renovation services. However, if you know that you lack the skill, or that a project like this may take too much of your time, better hire some professionals and have them do these fixes for you. If you’re willing to take the necessary time to renovate the properties yourself, specialists even encourage such actions, as they can be incredibly rewarding.
However, before purchasing a property which you plan to renovate, make sure to give it a good inspection. In some cases, the renovation costs may rise too high and the property may not be worth your time and attention. In case you decide to renovate an investment property in a bad condition, this may easily turn into an incredibly frustrating process. As a result, never buy a property which you plan to resell before a professional inspection.
1031 Real Estate Investments
Tax-deferred real estate investments are a thing nowadays, thanks to the 1031 Section. This approach also offers increased flexibility to real estate investors. These investments only have to be like-kind, but only in terms of the property’s value. Organized as a separate entity under the Delaware Statutory Trust laws and regulations, these investments benefit from an increasing popularity. Because these property swaps are tax-deferred but also incredibly flexible, many have reached a comfortable financial status thanks to this investment strategy. Swapping unprofitable properties for ones with a higher potential on the local market seems to be one of the numerous incredible approaches put into practice by investors that prefer this method. But, besides being so flexible, DST investors also have several other advantages from this type of investments.
DST investors are not responsible for making operating decisions;
DST investors are not responsible for managing the real estate property;
DST investors receive distributions from all the profits made in the Fund’s name;
Have a limited liability over the real estate property;
Don’t have to disclose personal information at any given time.
Not only these investments are profitable and flexible, but they also offer increased protection to investors. Moreover, these swaps seem to be the option of choice for those who want to increase their profits, without any type of efforts.
The “Buy and Hold” approach
Another simple real estate investment strategy that also brings some beautiful profits to those that put it into practice, the “buy and hold” strategy is the oldest approach in the real estate niche. While it will offer an increased capital, this is not the fastest real estate investment approach. In many cases, it may take years for a property to rise in value, which means that you might have to wait for some time. However, that time is not time that goes up in the air, as you can always rent that particular property until the market is profitable enough. Although there are some risks of this type of investment method, these are quite low, in comparison with other strategies.
The old-fashioned rental approach
Investing in rental properties may be the most widely-used investment strategy in terms of real estate. These investments are profitable, but the investor must make increased efforts for managing these properties (unless it is a DST investment). This approach secures a steady monthly income for the whole property, fixed expenses and if placed in the right area, investors may benefit from incredible financial advantages from it. Near college campuses, near manufacturing factories and well-seen neighbourhoods seem to be the best areas in which to invest in such properties. The placement contributes greatly when it comes to profits, and these areas seem to be the most profitable of them all. Also, when you consider investing in a rental property, make sure to do your homework well. Areas with low crime rates are great for this purpose, and so are areas in which work hubs are the most animated. Entertainment places such as parks and malls also seem to bring more high-quality tenants, that are willing to pay an extra monthly amount just for the sake of an easy access to these entertainment means. When searching for the perfect rental investment property, make sure that it will be suitable for either families or students.
Airbnb rentals also work wonderfully
If you are searching for an approach that will offer a high profit over a short interval, then this is the right approach for you. The main idea is to offer cheaper rental than hotels do, for short-term tenants, that in your case are mainly travellers. This means that you must identify areas in your city (or other cities) with a high touristic potential and invest in an apartment building or a simple apartment.
These are only a few of the strategies that seem to work wonderfully for real-estate investors all over the world. For the best results, make sure to adapt these approaches to your particular situation and the situation present in the areas in which your investments are concentrated. Also, make sure to check other investment options, as the market is filled with those.
The fix and flip approach
This strategy is quite of a popular one, many television shows featuring such transformations. This approach means that you buy a property at an accessible price, bring some improvements and renovations, as needed, and then sell it for a higher price. The complexity and costs of these renovations may vary from complex ones to a simple paint job or wallpaper replacement. Many investors choose to manage these “fixes” themselves, in order to save some generous amounts of money on professional renovation services. However, if you know that you lack the skill, or that a project like this may take too much of your time, better hire some professionals and have them do these fixes for you. If you’re willing to take the necessary time to renovate the properties yourself, specialists even encourage such actions, as they can be incredibly rewarding.
However, before purchasing a property which you plan to renovate, make sure to give it a good inspection. In some cases, the renovation costs may rise too high and the property may not be worth your time and attention. In case you decide to renovate an investment property in a bad condition, this may easily turn into an incredibly frustrating process. As a result, never buy a property which you plan to resell before a professional inspection.
1031 Real Estate Investments
Tax-deferred real estate investments are a thing nowadays, thanks to the 1031 Section. This approach also offers increased flexibility to real estate investors. These investments only have to be like-kind, but only in terms of the property’s value. Organized as a separate entity under the Delaware Statutory Trust laws and regulations, these investments benefit from an increasing popularity. Because these property swaps are tax-deferred but also incredibly flexible, many have reached a comfortable financial status thanks to this investment strategy. Swapping unprofitable properties for ones with a higher potential on the local market seems to be one of the numerous incredible approaches put into practice by investors that prefer this method. But, besides being so flexible, DST investors also have several other advantages from this type of investments.
DST investors are not responsible for making operating decisions;
DST investors are not responsible for managing the real estate property;
DST investors receive distributions from all the profits made in the Fund’s name;
Have a limited liability over the real estate property;
Don’t have to disclose personal information at any given time.
Not only these investments are profitable and flexible, but they also offer increased protection to investors. Moreover, these swaps seem to be the option of choice for those who want to increase their profits, without any type of efforts.
The “Buy and Hold” approach
Another simple real estate investment strategy that also brings some beautiful profits to those that put it into practice, the “buy and hold” strategy is the oldest approach in the real estate niche. While it will offer an increased capital, this is not the fastest real estate investment approach. In many cases, it may take years for a property to rise in value, which means that you might have to wait for some time. However, that time is not time that goes up in the air, as you can always rent that particular property until the market is profitable enough. Although there are some risks of this type of investment method, these are quite low, in comparison with other strategies.
The old-fashioned rental approach
Investing in rental properties may be the most widely-used investment strategy in terms of real estate. These investments are profitable, but the investor must make increased efforts for managing these properties (unless it is a DST investment). This approach secures a steady monthly income for the whole property, fixed expenses and if placed in the right area, investors may benefit from incredible financial advantages from it. Near college campuses, near manufacturing factories and well-seen neighbourhoods seem to be the best areas in which to invest in such properties. The placement contributes greatly when it comes to profits, and these areas seem to be the most profitable of them all. Also, when you consider investing in a rental property, make sure to do your homework well. Areas with low crime rates are great for this purpose, and so are areas in which work hubs are the most animated. Entertainment places such as parks and malls also seem to bring more high-quality tenants, that are willing to pay an extra monthly amount just for the sake of an easy access to these entertainment means. When searching for the perfect rental investment property, make sure that it will be suitable for either families or students.
Airbnb rentals also work wonderfully
If you are searching for an approach that will offer a high profit over a short interval, then this is the right approach for you. The main idea is to offer cheaper rental than hotels do, for short-term tenants, that in your case are mainly travellers. This means that you must identify areas in your city (or other cities) with a high touristic potential and invest in an apartment building or a simple apartment.
These are only a few of the strategies that seem to work wonderfully for real-estate investors all over the world. For the best results, make sure to adapt these approaches to your particular situation and the situation present in the areas in which your investments are concentrated. Also, make sure to check other investment options, as the market is filled with those.
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