Property investing is a wealth-building process that can require a lot of planning, especially in the beginning. After all, most people don't start investing in real estate with lots of cash to spare. If you want to get into real estate investing but need to know how to start building your wealth, here are some strategies you can use to get off the ground.
Why you need an investment strategy
Getting into property investing can be incredibly daunting. Putting your hard-earned money into a property, hoping to make it back in the future, is a leap of faith. Simon S. Mass writes in Forbes, "the first few years of investing will be the hardest… A few years in, perhaps five or six years after you jumped into the market, you'll start to see results (for example, I've been seeing an average of 43% annual return). Your ability to do more will increase when you enter the world of leverage."
Types of strategies
Here are three strategies – although there are many more – to serve as the foundation for creating a property investment strategy.
Live-in strategy
The live-in strategy is one of the easier and more beginner ways to get into investing. This is when you live in a house you intend to use for investing. You can do this in a few ways. One option is "house hacking," which is when you buy a multi-family home and live in one unit while renting out the others. Another option is to live in a house that will eventually become a rental.
Business strategy
Making property investment a business can be more effort than the previous strategy, but if you're up for a fixer-upper or you're good at sales, this is for you! The first part of this strategy is familiar if you also love HGTV, the fix-and-flip. For those who don't know, this is when you buy a property that needs renovation for a low price, then renovate and sell it for a profit. The other business strategy is to wholesale. Wholesale is when you find a good deal on a property and resell them quickly for a markup. This strategy is best for those good at sales and marketing. Buying a house just to rent out can also be a part of this category.
Passive strategy
The passive strategy can take two forms, syndications or Real Estate Investing Trusts (REITs). The first strategy, syndications, is pooling your money with other investors to buy real estate or make loans. It's a way to invest in other strategies without having to put the deals together yourself. Syndications can be a very passive strategy, but the big earners in this category often invest more time. REITs are similar to mutual funds, but instead of investing in many stocks or bonds, REITs allow you to own pieces of commercial, income-producing properties. This strategy is truly passive once you buy it.
Creating your strategy
The strategy you choose for real estate investing depends heavily on how much time and effort you are willing to invest. Here are some factors to consider before investing:
Time
Renovating
Initial investment
Upkeep
Market knowledge
If you are very new to investing, consider the live-in strategies, or the flip-and-fix strategy if you have the skills and time to renovate. If you live far from your properties or want to invest in another area, something that requires renovations or upkeep probably wouldn't work out. The passive strategies may be for you if you don't have much time to spend on investing but you have good knowledge of the market.
If you're still struggling to decide what strategy is best for you, book a consultation with an expert at https://www.regalwayhomes.com/bookings-checkout/real-estate-investment.