If you’re ready to find a new path towards wealth and an early retirement, then real estate investing might be for you.
But how do you get started? And what if you don’t have a million dollars in the bank? Do you need to have good credit? These are common questions and fears that stop people like you from getting into real estate investing. The good news is that getting started is easy, as long as you choose the right strategy and many of the questions you have aren’t going to block you from starting.
Below you will find 13 of the easiest strategies to get into real estate investing. From no money in the bank to expanding your empire, we’ve got you covered!
Many of us have watched the shows and that is why this is one of the first things that comes to mind when looking for real estate investing strategies.
In order to be successful, you need to have a thorough understanding of the real estate market and how to avoid unexpected expenses. It takes years of studying and experience to reduce the risks involved, but it also becomes a profession that many love.
Bonus tip – If you choose to flip houses, don’t just limit your scope to making significant renovations. There are plenty of other ways to increase a property’s value: minor additions, updates, and general housekeeping are all things you can do to improve a home’s market value and make a profit.
Unlike flipping a house, using rental properties as a real estate investing strategy brings you profit over time vs. a quick lump sum. It is more sustainable and you have more control.
In the long run rental properties can be far more profitable. That said, for this to be successful, you need to be sure you have good tenants and that you can play the role of a good landlord by taking care of repairs and making sure the property is in perfect condition. You’ll also potentially have to deal with legal issues if you end up with the wrong tenants.
Bonus tip – Homes that are up to date aren’t your only option for rental properties either. The Flip-to-Rent method is something you should consider taking advantage of.
In this process, you buy a fixer-upper, perform the necessary renovations, and then put a paying tenant in place. This process does require more work on your end but can make a home profitable to you much quicker than if you were to invest in a pristine property in the first place.
An alternative to investing in a standard rental property is investing in vacation rental properties. The main advantage of investing in vacation properties is that they bring far more money from tenants than residential rentals do. But your property has to appeal to a wider variety of people and you always having to be booking new rentals.
Finding a knowledgeable and trustworthy property management company is vital if you do not have the time to do it yourself or you do not live within close proximity to your property.
If you have a desirable rental in a popular vacationing spot, you stand to make a considerable profit. You can also use the home for your personal use when tenants aren’t in place as a double bonus.
One other downside is that upkeep is far more intensive, and that can take up a good amount of your time and the money you make from renting it out.
Wholesaling Real Estate
Real estate wholesaling is one of the fastest ways to make a profit in real estate.
The primary benefits of this real estate investing strategy are that it requires you to invest very little of your own money, if any, and you can make a quick profit. The drawback is that you need to understand which properties are most desirable at the moment and to have the connections to buyers ready to enter into a contract relatively quickly.
If you’re thinking about getting started with wholesaling real estate, it’s wise to start local. The profit margins may be smaller than if you were to invest “in “hot” locations, but you already have a great understanding of what’s desirable in your area. Furthermore, it’s much easier to build relations with potential buyers as you likely have personal connections or mutual friends to aid with making contact.
Investing in Real Estate Investment Trusts (REIT) is one of the simplest ways to profit in real estate. A REIT is a company that owns and operates income-producing real estate but relies upon funding from publicly traded shares.
This strategy’s benefit is that it works similarly to investing in stocks, so your role is simple. You don’t have to worry about managing the properties, just collecting a profit. The drawback is that it’s a long-term investment strategy that offers payouts in small intervals. If your goal is to retire quickly, REITs are not for you.
There are plenty of instances where other investors make significant profits off this strategy, but you can’t expect that to be you out of the gate. Like with stocks, this takes seasoning and experience to understand what to invest in and when. Over time, your profits will increase, but you want to pace yourself and build connections with other investors to create a sound strategy.
Real Estate Crowdfunding
Like REIT funding, seasoning is essential. You want to spend time and familiarize yourself with the trends of this market. Social media is an excellent source for finding crowdfunding opportunities and a great way to connect with like-minded investors. Starting small is critical, but with enough time and success it will allow you to make more significant contributions and earn better rewards.
House hacking is an excellent way for new investors to start making money. This process involves living in a multi-family property like a fourplex and renting out unoccupied units to other tenants. Their rent pays your mortgage and bills so that your income from other sources can be used to fund additional investment strategies. The drawbacks of this are limited so long as you are okay with sharing a property with others and acting as a landlord.
One thing that’s great about this method is that you can use it to fund your own relocation to a hot spot for real estate. The idea of moving to a booming city is often delayed or deferred due to the high living costs of these areas. With house hacking, you can use your tenants’ rent to cover your own. Another benefit to be aware of is that once you move to your own place, you can then rent the unit you lived in to another tenant and collect even more rent.
Rent a Room Out
If you’re already a homeowner, you can always rent out a vacant room or rooms to earn extra income. You can’t collect quite as much you would from renting out a unit or an entire house, but the income can help you put up additional cash toward other investment strategies. This method takes some patience as you will need to be comfortable sharing living spaces with others.
Buy, rehab, rent, refinance, repeat. That’s what BRRRR stands for in real estate investing. The process is self-explanatory, but success is dependent on more than following a few words.
The key to pulling this off is having a good eye for the market. Ideally, you’ll buy a home that’s far enough below market value that your renovations won’t eat up your profit, but not one that’s so far gone that it will take a ton of money and work to make it livable.
Once you refinance the property, you pay back your original lenders and use the profit as a down payment to repeat the process. This does take a little more effort than other investment strategies, but it can be used to produce multiple sources of income from paying tenants quickly.
Flipping houses can have a significant payout, but it takes a considerable amount of money to do properly. Everything from purchasing the home, to renovations, to capital gains taxes are all elements you need to consider carefully to be successful.
One way to lessen the expenses involved is by living in the house as you renovate it. This way, you only have one mortgage and living in the house for two years can make you exempt from capital gains taxes when you go to sell the property. But proceed with caution as there are a lot of legal guidelines you’ll need to follow.
Live-in-flip is a long-term investment strategy, and that’s the only real drawback, but it can propel you into the lifestyle you crave if appropriately executed. An alternative to this method is to rent the house once you have moved out rather than selling it.
Sweat equity is where you do the work and put in the man hours vs. hiring contractors and professionals to maintain and/or rehabilitate a property. This is often done in a partnership situation: a friend or experienced professional will front the money for a project, you will provide the labor, and both partners split the profits.
The benefit of rolling up your sleeves and doing the work yourself instead of paying high labor rates is self-evident. The drawbacks are that if you are unskilled, you can wind up spending more time and money on a project than it’s worth, and you can cause damages that you are ultimately responsible for covering.
Being a Private Money Lender
If you are wealthy, you can consider the option of lending cash to other real estate investors who are buying and flipping homes.
This strategy’s benefit is that all you’re responsible for is making sure you receive the money you lent and collecting interest on time. Lending to the right people is a surefire way to make easy money.
The risk is that you need to be willing to loan out large sums of money to individuals and hope their experience and work can result in profit. You need to make sure you trust the person’s skill, knowledge, and integrity before lending money to them for a project.
Take note of the fact that private money lenders are a great source of project funds. Banks often won’t outright finance projects or investment properties, making “hard-money” or private lenders the only choice. Whether you’re the lender or the borrower, this is a crucial bit of information you will take advantage of for many investment strategies.
Build a New Home on Spec
If you’re a skilled worker and have some cash to burn, you don’t want to overlook the possibility of building a home that suits current market trends.
In many ways, this is safer than renovating as you’re not trying to make a home something it isn’t. There’s also the security of knowing that everything is brand new and in working order.
The risk in this real estate investing strategy is how time-consuming the process is. Building a home can take well over a year. That means what’s popular right now may not be desirable once the project is completed. And some of the features could have newer versions driving the value or demand down.
To be successful, you need to identify long-term trends and work quickly to achieve your goal.
Becoming a real estate investor isn’t as hard as you’d think. You just need to find the right strategy that works for you. If you know someone who would benefit from this article, we’d love a share on social media. You can also subscribe to our newsletter and get an email each time we add a new post or guide.