More billionaires made their wealth through real estate than any other form of business. That’s because it’s one of the most tried and tested way of building wealth. Think of this, no other type of busines provides your with capital appreciation, steady stream of income and tax breaks all in one.
But what makes real estate investing unattractive to some?
We’re not sure.
It doesn’t take rocket science to go and venture into real estate investing. Maybe it’s because of the misconception that real estate requires a lot of capital. Maybe it’s because most people like following business trends in manufacturing and/or services that they forget the most obvious trend that withstood the test of time real estate.
And, unlike other types of businesses, real estate investing offers a lot of options to choose from. Most books and gurus would tell you to focus on a particular type of strategy like house flipping, rehabs, apartments, townhouses, subdivisions, etc.
Let’s briefly discuss some of the most popular strategies and then you choose what you’d like to start with.
There are practically two types of real estate strategies, Buy and Sell or Rentals.
Buy and Sell
1. House flipping
This is the most elementary form. It’s practically buy low/sell high.
But who the hell would sell their land or house and lot low?
Buy a house from a motivated seller, it might be from someone looking to change address, someone who has bad memories in the place (death of a loved one, divorce, etc.) or someone who’s in financial trouble. You’ll most likely buy it at a very low price and then flip the house at market price.
Easy money. wink* wink*
2. Renovation
This is a variant of house flipping. Buy a house that needs a bit of love and then renovate it to increase its value significantly. Houses that need renovation leave a lot of room for negotiation too. Seasoned renovation experts are able to do this with relatively low budgets. There are a lot of TV series on house renovations too. Maybe you can get an idea by watching these.
3. Subdivide
Subdividing huge plots of land and then selling these is a good way of earning/flipping land. A good variant is to also develop the land and build houses in each subdivision. It ensures consistency of house design across the neighborhood which makes it an aesthetically pleasing neighborhood for buyers.
Rentals
4. Apartments
If you plan on holding your property for long-term but would like to earn extra from it, then building an apartment or an apartment complex is your passive income generator. You’ll get a nice steady income from rent and have capital appreciation at the same time. Bear in mind that you’ll have to screen tenants properly because they might end up trashing the apartment. You can do the screening yourself with a bit of effort or hire a professional property manager would do the trick.
5. Commercial
Mcdonald’s gets most of its revenue from land leases on its franchisees. If you have the budget to buy commercial properties, one of the most profitable ways to earn is to have it rented or leased. In this strategy you can go for office space, retail, industrial or even land rental/lease. It can be a combination too, commercial space on the first few floors, office spaces on the o middle floors, and then you can turn the penthouse into your own residence.
Of course, you’ll usually need more capital for this strategy too.
But if you don’t want the headache of looking for properties and having each rented, then you can always go and invest on REITs or Real Estate Investment Trusts. These trusts pool money from many investors and then use the funds to invest in real estate. REITs function much like mutual funds and can be availed through a regular broker. There are 200+ publicly-traded REITs in the US alone. You’re going to have to do your own research on what trust fund fancies you.
The upside on REITs is the liquidity of the asset. You can sell your shares any time. The downside is that you have no control over the assets and that you’re also paying for management fees.
There are a few more real estate investing strategies but the ones we shared are the most basic ones.
Which one are you interested in?
Please comment below.