Although it’s had its ups and downs, real estate investments remain one of the most profitable industries to invest in. The real focus, however, is on knowing the real estate investment strategies and the best that suits you based on your experience and knowledge. This article discusses the different types of real estate investment strategies that you can apply and what each entails.
What are the different types of real estate investment strategies?
There are different strategies through which you can invest in real estate. These strategies are:
1. Rental properties:
If you have the finance to foot maintenance cost upfront, including covering vacant months, and the patience to manage tenants, then this is for you. Rental property investment is simply a good opportunity for those with renovation skills who are handy with stuff. This is because it would save you a lot of cost on house maintenance. Rental properties follow a process of you owning a property and renting out to tenants
2. House flipping:
If you are experienced enough in the real estate industry, then you can earn a lot from house flipping. House flippers have experience in renovation, marketing, and real estate valuation. The idea is that you find less valuable homes, purchase it at a cheap price, and renovate before selling for a profit. House flipping requires capital and the ability to efficiently use it for renovations without running a loss.
In flipping, we recommend it that you should not hold on to the property for too long; tops six months. Expert property flippers don’t focus on investing in improving properties. They rather look for properties with intrinsic value and flip for profit.
3. Real estate investment groups (REIGs):
if you want to invest in real estate without the stress that comes with managing the property, then REIGs it is. These investment groups are like mutual funds that invest in real estate properties on your behalf. The mode of operation is usually that the group purchases a set of buildings. They then invite investors to purchase specific blocks or apartments through them.
The group manages maintenance and day to day running of the building, while investors own the living space. In exchange for their service, the group takes a certain percentage of the living space.
4. Online real estate platforms:
Online real estate platforms connect investors with real estate developers. It is essentially an investing platform that you can join and become part of a larger residential deal. These platforms are also known as real estate crowdfunding and require a substantial amount of capital. However, the capital is not up to the amount of solely purchasing a property.
5. Real estate investment trusts (REITs):
this is for investors looking to diversify their portfolio without performing a real estate transaction. It is like the stock market for real estate and is even literally sold on major exchanges like conventional stocks. They create a real estate investment trust when a corporation purchases and operates properties with investor’s monies.
Just like regular stocks, REIT also gives out regular dividend payouts to investors. To maintain its status, the REIT must payout up to 90% of its taxable profits as dividends. These investments are also highly liquid. In fact, they are the most liquid of the different real estate investment strategies. This is because they are listed on the stock exchange, and you do not need a realtor to help cash out.
All the types of real estate investments are beneficial; it only depends on how experienced you are. You can make a lot of money from house flipping to simple REIT if you do your research properly and invest in the right channel.