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The 15 Most Efficient Real Estate Property Investment Strategies

Real Estate Investment is said to be an ideal kind of investment. But the real estate niche comprised of a lot of different ways to generate money. There are a lot of strategies to engage. As a rookie investor, these options can be a bit overwhelming. 

So, with this article, we have collated fifteen (15) of the most efficient strategies in real estate investing. These recognized techniques will showcase to you a good grasp of how to generate a lucrative income in real estate investing. It is well-hoped that one or more strategies mentioned here will be a tailored fit for your scenario. And if that happens, this article can shell out the perfect jumpstart for your own real estate investing escapades. 

It is proper that we should know the difference between, tactics, strategies, and goals.  Basically, you could regard real estate investment as well as wealth building as reaching the peak of the mountain. And you, of course, the hard-working and dependable mountain climber. We envision the peak as your life goals and financial dreams. And there are tons of milestones that will surely go along your way. 

Strategies are akin to plans on how to climb the mountain. These are the routes that you will pave on the way to the top; plans that will take you the safest and fastest means. 

On the other hand, tactics are like the tools that you will utilize in climbing such as the binoculars, ropes, and ladders that will aid you in practically climbing those routes. But a lot of real estate investors are caught up in tactics of being vague on why they are using that in the first place. Getting excellent at using tactics without a strategy can only make you good at hiking right off financial cliffs. So, it is best recommended to obtain clear on fundamental real estate investment goals such as financial liberty or a specified amount of clear and free rental properties. Then acquire a precise one or two strategies that you feel you are good at. Then, all the tactics that you will acquire throughout practice will be very much effective.  Strategies are classified into groups such as business strategies, starter, wealth, debt and passive strategies. We have listed below fifteen of the most effective strategies based on how they are utilized:

BUSINESS STRATEGIES. This is more on the business side as it can generate income and replace your day job. However, you should be prepared to invest the upfront effort and time of a state-up business to be able to make them effective. 

  1. FIX AND FLIP. This principle is the business of looking for properties that requires repair and extensive work and reselling them at the prime amount for a profit. If you know HGTV channel, that is basically what they do.
  2. WHOLESALING. This is the business of looking for good deals on investment properties and afterward, will resell them immediately for a small profit. The nucleus of this type is being extra good at negotiation and marketing to obtain good deals. If you are excellent at sales, you will surely be complacent at wholesaling. But if the concept of sales makes you cringe, just look for a different strategy. ”Bird-dogging” on the other hand is a strategy used to hunt down excellent deals for other more experienced investors. That is the strategy used by newbies apprenticing for seasoned investors. 

ROOKIE STRATEGIES. These strategies are considered the safest way to jumpstart in real estate investing. All it requires is a little hard work, even with a small amount of cash in your pocket, you can roll the ball!

3. HOUSE HACKING. This means living in a home that also generated a profit at the same time. It is best explained in duplex, triplex, quadruplex, or property with extra rentable space such as a guest house, basement, and spare bedrooms. By renting out spaces in your residence, you can lessen your housing cost. 

 

House hacking is also a good strategy because you will be able to learn the landlord approach while living at your rental. And as long as you are living there, you cannot move out and transition your unit to a long term rental.

 

4. LIVE IN THEN RENT PRINCIPLE. Live in then rent principle says it all. It is simply living in a house that will practically become a rental. This essentially means that the property must be utilized as your home and as a way to generate income in the long run. But as compared to house hacking, you do not rent the property while you settled in there. By performing this strategy, a couple of times is an efficient way to generate a small portfolio. And you can get the advantage of living next to your tenants as in house hacking. 

 

5. LIVE-IN-FLIP PRINCIPLE. This is a kind of strategy where you purchase and move into a home, jazz it up, and wait for about a couple of years or more to resell it for an income. If you have an idea about the IRS guidelines, profits that are below $250K for an individual or $500k for a couple, will not be subjected to tax. 

 

6. BRRRR INVESTING.  BRRR means Buy Remodel Rent Refinance Repeat. That’s the story. When carefully executed, it is an effective way to create a rental portfolio without running out of liquid early in your investing years. Fundamentally, you look for fixer-upper houses that you can purchase practically below their true value. You utilize financing or short term cash to purchase the house, and then, as soon as it is stabilized and fixed, you refinance with a long-term mortgage. If successful in implementation, you can be able to obtain your original capital amount back out for your next engagement. 

 

This is best recommended to use in your early years to create your portfolio. Apparently, it is best to pay close attention to lover risk and lower leverage approaches instead of always leveraging as much as possible. A great example of such a transition is the rental debt snowball below. 

WEALTH BUILDING STRATEGIES. The attention of these core wealth-building strategies is turning tiny hatchlings into a big amount of wealth. Real Estate investing has long been an effective tool for this goal. 

7. SHORT-TERM AND HOLD RENTALS. This strategy focuses attention on purchasing and holding rental properties for a practically short period, say one to five years. Often, the goal of this strategy is to force property appreciation by means of remodeling, increasing the rent while lessening the expenses, and any or all of those. This type of principle works effectively for multifamily units run around gigs. It also works efficiently with rentals in high-end properties. 

 

8. LONG-TERM BUY AND HOLD RENTALS. This is the principle of owning properties with the simple intention of keeping with them for a long period of time. The advantage of this steady and slow efficient strategy include rental income, tax shelter from depreciation expenses, price appreciation and more importantly, amortization of loans. These types of properties attract the best lessees and are considered to be the least hassle to maintain and have the tendency to appreciate significantly over a long period of time. 

 

9. THE RENTAL DEBT SNOWBALL PLAN. According to studies, this type of strategy is the all-time favorite strategy for effectively generate income, build an ongoing income and more importantly lessen the risk from rental properties. It basically incorporates a gathering of all the cash flow from your present rentals as well as other sources of income and then putting that cash flow to pay off a single mortgage debt at a time. The key to this strategy is the speed that debt payoffs begin to accelerate or snowball over a long period of time. If you are eyeing to retire within ten to twelve years or less, this strategy is destined for you. 

 

10. THE ALL-CASH RENTAL PLAN.  This scheme is the same to the Rental Debt Snowball Plan since it snowballs rental income for income generation. But instead of utilizing mortgages, you just save up a significant amount of cash and purchase a rental property straight up without any debt. 

 

11. THE TRADE-UP SCHEME. The rental trade-up scheme or principle is excellent for entrepreneurial investors which are willing to focus on a lot of dynamic sense. This strategy is an approach to immediately come up with real estate wealth and generate income by transitioning from smaller to bigger real estate units. It typically utilizes a technique more commonly known as “1031 tax-free exchange. 

 

DEBT STRATEGIES. These types of strategies put you into the lucrative role of lender of an owner of a specific property. 

12. HARD-MONEY LENDING. Hard money Lending is the strategy of coming up with short-term loans to real estate investors who flip properties or purchase rentals. Basically, high-interest rates are applied with the loans, and lover loan to value ratios. While it may be true to say that the strategy may be lucrative in nature, it also possesses high risk. If you have to take the unit back at foreclosure, you need to ensure you are secured. 

 

13. DISCOUNTED NOTE INVESTING. This strategy means coming up or purchasing notes at a discount to be able to avail of the value of the full notes. And because of the so-called margin of safety, you can come up with huge returns and lessen your risk. 

 

One classification of Discounted Note Investing incorporates purchasing notes that are typically delinquent, from banks or owning financing sellers. This is a bit of an advanced strategy so it needs a lot of studies before this can be availed of. 

PASSIVE STRATEGIES. Although some of the passive strategies listed below still incorporate essential upfront investment decisions, they need a minimal day to day management as compared to some of the earlier strategies. 

14. CROWDFUNDING AND SYNDICATIONS. Crowdfunding is ideally a new form of syndication investing where deal chances are marketed over the web or internet. The majority of these sites need you to be an accredited investor, but sometimes you can start investing with a minimal amount from $1000 dollars to $5000 dollars each investment. If you want to learn more about this, visit www.theapartmentqueen.com .

 

Generally, syndication is crucially pooling your money with some other investors to purchase property or make loans. It is a path to invest in any other types of strategies discussed earlier without having to put the deal together. You invest your hard-earned money with general partners or what we know as syndicators who look for and maintain deals for you. Although this type of strategy has been regarded as a passive real estate investment strategy, this is somehow misleading. This can be very easy and passive but effective investors per se are still considered active. 

 

These active investors actively screen general partners and sponsors. They also transact opportunities before saying yes to investment. Simply put, they tend to say “no” instead of saying “yes”. And that is highly different from passive investing where you come up with very few active decisions. 

15. REAL ESTATE INVESTING TRUSTS. More commonly known as REIT, are very akin to a mutual fund. But instead of giving you the freedom to own a piece of a lot of bonds or stocks, these REITs allow you to own a piece of income producing properties such as commercial units and multifamily units. And unlike some of the other investment strategies above, this type of strategy is passive when you purchase it.

CONCLUSION

Basically, there are different paths up the financial mountain utilizing real estate investment. Each has it’s own negative and positive. You have to bear in mind that the majority of the investors incorporate different strategies at different aspects and periods. You can mix and match the strategies if you want to. And do not worry if one strategy will not work for you effectively since real estate is considered an investment in an entrepreneurial venture. Sometimes you have to do things and experiment with it so that it can help you find your timing.

 

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Kaylee McMahon

Apartment investor/ TREC® Brokerage LLC Owner

 

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