Real estate investing offers an I.D.E.A.L. investment opportunity, but with so many strategies available, it's easy to feel overwhelmed as a new investor. In this article, we will explore the 15 best real estate investing strategies that can help you make money in the industry. Whether you're a beginner or looking to expand your portfolio, there's something here for everyone.
Real Estate Goals vs Strategies vs Tactics
Before diving into the strategies, let's clarify the difference between goals, strategies, and tactics. Think of real estate investing as climbing a mountain, with your financial and life goals as the peak. Strategies are the routes that will take you towards that peak in the fastest and safest manner, while tactics are the tools that help you climb those routes.
Having a clear understanding of your goals and strategies will give purpose to the tactics you employ. So, start by defining your goals and identify one or two strategies that resonate with you. With that foundation, the tactics you learn will become much more valuable.
Now, let's delve into the 15 best real estate investing strategies.
The Best Real Estate Investing Strategies
Business Strategies
These strategies focus on generating income through real estate as if you were running a business. While they require upfront time and effort, they have the potential to replace your job and become a lucrative source of income.
1. Fix-and-Flip
The Fix-and-Flip strategy involves finding properties that need work, renovating them, and selling them for a profit. It's similar to what you see on HGTV's flipping shows. This strategy can be challenging but rewarding, providing you with beautifully finished houses and potentially large sums of money. Resources like "The Book on Flipping Houses" and "The Book on Estimating Rehab Costs" by J Scott are excellent references for this strategy.
2. Wholesaling
Wholesaling entails finding good deals on investment properties and quickly reselling them for a small profit. This strategy relies heavily on marketing and negotiation skills. If you enjoy sales, wholesaling can be a great fit for you. If not, there are other strategies to consider. "The Ultimate Beginner's Guide to Real Estate Wholesaling" by Brandon Turner is an excellent resource for this strategy.
Starter Strategies
These strategies offer safe and accessible entry points into real estate investing, some requiring minimal cash investment.
3. House Hacking
House hacking involves living in a property that generates income, such as a duplex or a house with rentable space. By renting out part of your home, you can reduce your housing costs significantly. This strategy allows you to learn the landlord business while living at your rental property. "The House Hacking Guide" provides detailed instructions and a case study to help you get started.
4. Live-In-Then-Rent
Live-In-Then-Rent is about living in a house that will eventually become a rental property. Unlike house hacking, you don't rent the property while living there. This strategy allows you to build a small portfolio over time, and you don't have to be physically close to your tenants. Check out our case study to see how this strategy can work.
5. Live-In-Flip
The Live-In Flip strategy involves buying a home, living in it, fixing it up, and reselling it after two or more years. The best part? If you follow IRS rules, you pay no tax on the profit up to $250,000 for an individual or $500,000 for a couple. This strategy can be a lucrative way to build savings, as demonstrated by Carl and Mindy Jenson in "Getting Rich with the Live-In Flip."
6. BRRRR Investing
BRRRR stands for Buy-Remodel-Rent-Refinance-Repeat. This strategy involves purchasing fixer-upper properties below their market value, using short-term financing or cash, renovating them, and then refinancing them with a long-term mortgage. If executed correctly, you can recover your original capital and continue investing. BiggerPockets is an excellent resource for learning more about BRRRR investing.
Wealth Building Strategies
These core wealth-building strategies aim to turn a small investment into substantial wealth over time. They leverage the long-term benefits of real estate investing.
7. Short-Term Buy and Hold Rentals
This strategy focuses on buying and holding rental properties for relatively short periods, usually between 1 to 5 years. The goal is to force appreciation through remodeling, rent increases, and expense reduction. Short-term buy and hold rentals work well for turn-around projects or properties in appreciating markets. "The Buy 3-Sell 2-Keep 1 Plan" provides a real-life example of this strategy.
8. Long-Term Buy and Hold Rentals
Owning real estate with the intention of keeping it for the long haul is a time-tested strategy. The benefits of long-term buy and hold rentals include rental income, tax deductions, mortgage amortization, and price appreciation. This strategy is ideal for properties in prime locations that attract high-quality tenants. "The Book on Rental Property Investing" by Brandon Turner is a comprehensive guide for this strategy.
9. The Rental Debt Snowball Plan
The Rental Debt Snowball Plan is a powerful strategy for building wealth and creating a passive income stream from rental properties. The idea is to use the cash flow from your current rentals to pay off one mortgage debt at a time, accelerating the payoff process over time. If you're looking to retire within 10-12 years, this strategy is worth exploring. Check out our Rental Debt Snowball case study for more insight.
10. The All-Cash Rental Plan
The All-Cash Rental Plan involves saving up cash and buying rental properties without any debt. While this strategy requires substantial upfront capital, it eliminates the need for mortgage payments. This approach is popular among investors who prefer a debt-free investment portfolio. "Real Estate Investing While Overseas in the Military" offers a case study of this strategy.
11. The Trade-Up Plan
The Rental Trade-Up Plan is a dynamic strategy for ambitious investors looking to build wealth and income rapidly. It involves moving from smaller to larger properties, leveraging a 1031 tax-free exchange technique. Trade-ups allow you to scale your real estate portfolio quickly. Check out our case study for more information on how this strategy works.
Debt Strategies
These strategies involve becoming a lender instead of a property owner, opening up profitable and passive investment opportunities.
12. Hard Money Lending
Hard money lending focuses on making short-term loans to real estate investors, typically involved in rentals or fix-and-flip projects. Although this strategy can be profitable, it also carries significant risks. It's essential to educate yourself thoroughly before engaging in hard money lending. Resources like Ian Ippolito's free Hard Money Lending Guide or Dyches Boddiford's Hard Money L
conclusion
As an aspiring real estate investor, you now have a comprehensive understanding of the 15 best strategies to make money in the industry. Each strategy offers a unique path to financial success through real estate. Remember, most successful investors combine different strategies at different times, and sometimes trial and error is necessary to find your sweet spot. So, define your goals, explore these strategies, and embark on your own real estate investing journey. Best of luck!
Which of these real estate investing strategies resonates with you? Have you tried any of these strategies before? Share your thoughts in the comments below!