Real estate investors are always on the hunt for a new property to invest in. There are different ways and strategies that might help a real estate investor to get greater returns. If you are also looking forward to investing in real estate, make sure to check out Venterra Real Estate.
In this post, we will try to explain top financing strategies for real estate investors. These strategies will give you a better idea of how you can make more money through real estate investing.
It can be categorized into the wholesaling and fix & flip strategy.
It is a business that deals in finding top-notch deals on property investments that are resold quickly. To be good at wholesaling, you have to be good at negotiating and marketing. This business is for someone who is good at sales.
-Fix & flap:
This strategy deals in finding properties that require minimal work to be done on them like repairs or renovation. The refurbished property is then sold at a high price. Although it is not an easy strategy to follow especially for beginners, it is very rewarding once you have mastered its knicks and knacks.
This strategy is the easiest one on this list. With this strategy you can start investing in real estate even with no money. It can be classified into three subcategories namely, house hacking, live-in flip, BRRRR investing, and live-in the rent. We will discuss each of them below.
It means that the home you are living in will prove helpful in generate a good amount of income. For instance, if you live in a triplex, duplex, fourplex, or even a 2bhk house that has some additional spaces like a guest house, extra bedrooms, or basement, then you can rent it out and earn money. Renting some part of your house will help you reduce your housing cost. This strategy is very beginner-friendly and is the least complicated.
-Live In The Flip:
In this strategy, people buy a house, fix the house by making minor or major repairs, and then they wait for a few years to resell it at a profit. Although you will require a lot of patience, it is a very rewarding strategy and renowned real estate investors have made a lot of money using the live-in flip strategy.
BRRRR is an acronym of Buy Remodel Rent Refinance Repeat. It is an amazing strategy to develop your rental portfolio, provided you are performing the strategy correctly. Besides, with the help of this strategy, you will be able to develop your rental portfolio without worrying about draining cash.
Using this strategy, people get fixed upper real estate properties at a price lower than their actual value. Generally, people use their short-term financing to purchase the property. They then make necessary repairs and fix it. Once it is fixed, they tend to refinance it with a mortgage. If executed well, this strategy can prove very beneficial to you.
Wealth Building Strategy
The main aim of this strategy is to turn a low investment amount into huge wealth.
Long-term Holding Rentals:
Although the benefit you will reap from this strategy will come slowly but it will be worth the wait. This strategy includes loan amortization, rental income, price appreciation, and tax shelter. This strategy is easy to manage and isn’t very complicated.
Short-term Holding Rentals:
This rental strategy involves buying properties for a short period of around 1 to 5 years. The main goal of this strategy is to add value to the property by increasing the rent, reducing expenses, or remodeling. This strategy works great for properties in high-priced markets.
Trade Up Plan:
This strategy is perfect for you if you are an entrepreneurial investor. Using this strategy, you can quickly gain real estate income and wealth and slowly shift your investments from smaller to bigger properties. People generally use a technique known as the 1031 no-tax exchange in this strategy.
These strategies can be widely divided into two parts – REITs ( Real estate investment trusts) and syndications and crowdfunding.
Syndications And Crowdfunding:
Syndication essentially means to pool money with various investors and then purchase real estate. Using this strategy, you could invest with your partners or even syndicators who will hunt and manage deals on your behalf. Crowdfunding is a recent concept. It can also be stated as another type of syndication investment.
In crowdfunding, the deals are marketed via several online platforms. Most of these online platforms would want you to be what is called an accredited investor. However, if you want, you can start with smaller amounts also.
Real Estate Investment Trusts:
They are quite similar to mutual funds but it does not involve buying a large number of stocks or bonds. Rather REITs will allow you to own bits of various income-producing and commercial properties.
Discounted Note Investing:
This strategy means buying or creating notes at a discount to the full value of a note. There is a margin of safety in this strategy, and therefore one can make large returns and also minimize the risk. This is a very advanced strategy and is not recommended if you are new in the real estate world.
You will have to possess thorough knowledge of the working of this industry before you put this strategy into practice. One of the forms of discounted note investing is purchasing new notes from other banks or financing sellers.
Although it is a very profitable strategy, it is not recommended for small investors. However, there are a few exceptions and if you are interested in this strategy, you can take the help of your attorney before stepping your foot in this strategy.
Now that you have read all the strategies, it is up to you which one you think will work the best for you. However, it would help if you remembered that good investors use a mixture of many strategies to make it work for them. Therefore you will have to experiment a little to find your grounds.