There is not a single doubt that real estate investing creates a path to wealth and riches. Though there are plenty of possibilities and strategies for getting started in this business, some of which are better for novices than others. For instance, flipping houses is a lucrative investment strategy, but it is not recommended for beginner investors. This is because it is a high-risk investment that requires huge capital, experience, and great knowledge of the real estate market. Rather, here are eight ways Real Estate is your smartest investment strategies that are considered:
1. Long-term Residential Rentals
One of the most basic techniques for making cash in real estate is to leverage long term buy and hold residential rentals. In fact, People will always need a place to live, and that means getting associated with rental properties. You need to do the precise amount of due diligence to source your property by keeping three principles in your mind: location, location, location.
Yes, you have heard it before, but the location is everything when it comes to real estate. Not only does this utilize for an increased asset value over time, but also in your capacity to rapidly rent that property to a long-term tenant. When you are thinking of long-term residential rentals, look for a perfect location. That is more valuable than the current state of the property itself. In fact, run-down houses in great locations are one of the best investments you can make.
This includes a more traditional approach to making money in the real estate market. It meant buying a property with some cash on hand to make a down payment and then holding that property for the long term. Depending on your personal situation, you can simply grab that property for a very low or even no down payment. That is particularly true if this is a pre-existing, income-producing property.
If there is a positive cash flow in a residential rental, then it could be a great investment. Moreover, you are likely to not find that too easily, unless the current owner is unloading for personal reasons due to a divorce or other need to liquidate that property that requires having some cash on hand.
2. Lease Options
Lease options can be an excellent way to get involved in real estate without having to put up a significant amount of money or even have great credit at the outset. You are leasing with an option to purchase. This tends to work quite well when the real estate market is rising because you are creating a pre-set price at which you can later purchase the property.
If, for instance, the property market rises substantially, you can purchase that property at a discount. You can also potentially turn around and sell your rights for that property to someone else. The obvious bet here is on the market in real estate. As long as this is a choice you can practice and not something set in stone that says you have to purchase at the end of the lease regardless, then you could very well seek profit.
3. Home-renovation Flips
The fix-and-flip culture has erupted. Thanks to the popularity of the house renovation show, we are experiencing a massive boom in the traditional renovation flip market. While there can surely be a lot of money to be made here, navigating these waters, in the beginning, can be tricky. When you lack the experience or the knowledge, you could find yourself on the losing end if you do not select the right homes.
How much will the house be worth, once you have invested in repairs and fixes? To precisely determine that, you need a great relationship with a general contractor and an on-site tour of the property. While purchasing site-unseen at an auction may seem alluring, unless you really know what you are doing, you could lose money. Though, making money on a home-renovation flip can be rather straightforward, as long as you understand the underlying costs and potential value.
4. Contract Flipping
One way that you can earn money from real estate without having to put up much capital or credit is to flip contracts. All you need to do is find a motivated buyer and a distressed seller, then bring them together. While locating a distressed seller may seem difficult, the trick with contract flipping is to identify the distressed seller and locate a ready-to-go buyer.
By bringing these parties together, you have cut out the need to go hunting for a buyer after you have entered a contract. That situation presents more risk. Rather, by locating the sellers and the buyers beforehand, you can simply enter into a contract with the confidence that you will not get stuck having to close escrow on the property.
To do this, you have to be capable of identifying either vacant houses or houses that are behind on their mortgages. That is the tricky part. You are effectively trying to find distressed sellers, but houses that are already vacant are primed for an opportunity like this.
5. Short Sales
Short sales happen when the current owner of their house is behind on their mortgage, but the property has not yet entered into foreclosure. In order for this to occur, all parties have to agree to the transaction since the property is being sold off for less than is owed on the existing mortgages. This can be a great chance to make a quick profit without investing in lengthy renovations.
Moreover, succeeding with short sales or any other default-type auctions is usually tricky. You usually need to pay for the houses outright in cash, and sometimes that has to happen site-unseen. Short sales are better than auctions because you get a chance to check out the house and take part in it’s negotiation process. Except you are a seasoned investor, jumping in without a complete review and inspection could be risky.
6. Vacation Rentals
Vacation rentals can give a lucrative path to profits in the real estate market. Not only can you build some side hustle income from vacation rentals, but you could possibly make a significant amount of money and build up a substantial passive income stream if you are in a highly-trafficked tourist locale.
The best part is that you do not even need to own the properties to make money. Some of the successful property management companies of the world that specialize in vacation rentals do not actually own the houses but do provide a high-end consumer experience.
How do you participate in that? Leverage existing relationships with owners in your zone. Build bonds and network with others. Create systems that assure the utmost satisfaction.
7. Hard-money Lending
Hard-money lenders grant short-term loans to people who would not qualify for those loans. In order to partake in hard-money lending, you will need some capital behind you. These are loans that are often at high-interest rates because they are for very brief periods. To close your first sale, you could turn to a hard money lender. If you have what you perceive is a “sure thing” but lack the funds, this could be your best bet.
You can also become a hard money lender, but you will need some capital. This likely is not going to be the first way you start out making money in real estate, but as you build your network, capital and a solid portfolio of deals, you could provide these bridge loans and make a great rate of return.
Even if you lack an immense amount of capital, as long as you can successfully recognize the right deals, provide a small amount of money and generate a high success rate, you can possibly find investors to come on board without much difficulty. The interest rates here make some sense. There is quite more risk but also more reward. It can be a method to keep your cash fairly liquid and generate a nice gain in the short term without having to wait years and years for those returns to materialize.
8. Commercial Real Estate
One of the great possibilities in real estate for making a considerable amount of money is to invest in commercial real estate. Commercial real estate developers concentrate not only on flipping properties but also on developing them, adding value to properties in order to improve their net incomes through upgrades and renovations. They also advise on projects that may take more seasoned real estate investors to see to fruition.
People always need some space for offices and retail to run their businesses. These physical locations are like bread and butter in the real estate niche. As you progress, you can find ways to develop large scale buildings and open up shopping malls or more. But you have to start somewhere.