There’s no doubt that real estate investing creates a path to wealth and riches. However, there are plenty of opportunities and strategies for getting started in this business, some of which are better than others. For example, flipping houses is a lucrative investment strategy, but it’s not recommended for beginner investors. This is because it’s a high-risk investment that requires large capital, experience, and great knowledge of the real estate market. Instead, here are 7 investment strategies that are considered the best ways to make money in real estate:
1. Invest in Single-Family Homes
One of the most common methods for making money in real estate is to invest in long-term residential rentals. People will always need a place to live. Plain and simple. However, due to the rising prices of houses for sale and mortgage interest rates, people find that renting makes more financial sense. This makes getting involved with residential rental properties a smart investment strategy.
For beginner real estate investors, it’s best to invest in single-family homes as opposed to multi-family homes. On the other hand, single-family homes are easier to find, buy, manage, and maintain. But once you make that transition to Multi-Family homes you will never go back.
Moreover, single-family homes also have a higher chance of generating positive cash flow and appreciate faster than other property types. Tenants of these rental properties also stay for the long-term and generally take good care of the property and treat it as their own home. You need to remember, though, that you need to do the proper amount of due diligence to find a profitable rental property in a great location.
2. Invest in Turnkey Properties
Turnkey real estate is an investment strategy through which a real estate investor buys a property that is owned by a company. This company would have already applied the necessary renovations and will have the property ready to rent. In addition, these companies might also offer property management services. Any beginner investor with little down payment and reasonable credit can invest in these properties.
As you can already tell, investing in turnkey properties is one of the best strategies for beginner investors. They are easier to finance, manage, and can instantly start making money. Many real estate investors go for this way of investing in real estate because it allows them to minimize the time and money put into property investment. Therefore, turnkey rental properties allow an investor to receive passive income, making them great for making money in real estate investing for beginners.
3. Try House Hacking and Live for Free
One of the easiest and best ways to make money in real estate is by house hacking. This is a fairly simple investment strategy that involves buying a primary residence and renting out parts of it. Ideally, you’ll want to buy a multi-family home (duplex, triplex, fourplex) so you can live in one unit and rent out the rest to collect passive rental income which goes towards paying off your expenses. Essentially, you’ll be living in your house for free. When I was young I had built a fourplex and lived in one of the units, rented out the other 3, and then had 2 roommates. If you were to do this, you could practically live off the income and live for free depending on the buy.
Smart beginner real estate investors also use house hacking to bring in additional income and save it for a down payment on another investment property. Therefore, this investment strategy not only allows you to make money but is also a great way to build your real estate portfolio. Moreover, since you’ll technically be a landlord, house hacking allows you to gain experience with property management and what’s it’s like to own a rental property.
4. Rent Out on Airbnb
Love them or hate them, Airbnb rentals are here to stay. Since Airbnb was first founded in 2008, it has quickly become one of the best ways to make money in real estate. The rental demand for such properties continues to rise as travelers increasingly prefer “alternative accommodation” options to hotels. Thus, renting out a vacation home (or even a room) on Airbnb to short-term guests presents a tremendous opportunity for those interested in making extra cash through real estate investing.
Not only can you make some side rental income from vacation home rentals, but you can also build up a substantial passive income stream if you’re in a highly trafficked tourist locale. Cities like Miami and other hot tourist destinations in the US are well-known for having a high demand for short-term rental properties. If you rent out on Airbnb in such places, you’ll enjoy a high Airbnb occupancy rate and return on investment.
Related:Â 8 Best Cities for Airbnb Investment in 2019
It’s important to note that not all cities in the US are Airbnb friendly – short-term rentals are strictly regulated in some cities while others completely ban them! Therefore, always check your city’s laws and regulations before listing your rental property on Airbnb. Or if you want a second home in Payson, Rocky Point, or Sedona try and rent it out as much as possible and visit it when there is no one renting.
5. Invest in Real Estate Investment Trusts
One of the many benefits of investing in real estate is that there are ways to make money without actually owning an investment property. So, if you don’t have the capital to buy a house, there are other investment strategies you can try. One of the best ways to make money in real estate without property ownership is investing your money in a real estate investment trust (or REIT). This strategy is similar to investing in stocks or mutual funds.
A REIT pools money from investors to invest it in several income-producing real estate properties. Those can be large apartment buildings, office buildings, retail space, commercial real estate, hotels, etc. This way, you invest in real estate as a shareholder rather than as an investor owning these properties. In return, the real estate investment trust pays you dividends, which makes this investment strategy a great way to make passive income in real estate. You’ll make money without having to worry about maintaining the properties, finding tenants, or any other tasks that landlords are responsible for.
6. Manage Real Estate Properties
If you’re not interested in owning a rental property, another one of the best ways to make money in real estate is to start your own property management business. There are many property investors who, for one reason or another, struggle with managing their investments. Maybe they still want to keep their full-time job, maybe they’re buying real estate properties out-of-state, etc. These investors would pay good money for a property manager to do the job for them (typically 8-10% of each month’s rental income).
In addition, since many choose to rent instead of own their house, the rental market is strong. This means that the market for professional property management has never been better and it could be a lucrative area to get involved in. This is also a good idea if you’re hoping to own your own rental properties one day as you’ll learn the best practices to manage real estate properties.
7. Lend Money to Other Investors
The last investment strategy that is considered one of the best ways to make money in real estate without having to own property is to become a lender. Now, this requires you to have some capital. Hard money lenders provide short-term loans to property investors who did not qualify for a mortgage. This may not be the first investment strategy that comes to mind when thinking of how to start making money in real estate. However, it’s a good way to build your network, capital, and get a great return on investment.
Even if you don’t have an enormous amount of capital, you can easily find investors looking to finance their investments with hard money loans. So, as long as you successfully identify the right deals and provide an amount of money, you’ll have a high success rate. Moreover, these loans generally have higher interest rates, which makes sense considering the higher risk. These are also short-term loans meaning you can reap your rewards without having to wait years and years for returns. Right now in Arizona, the rates vary from 10-14 percent with some fees some of the time. You can do this from your phone in the Bahamas and always have the home that you can take back right at your fingertips.
If you have any questions about investing in Real Estate, call me at 480-466-4917 or email me at jay@jaybrugroup.com
Jay B
