People new to the real estate industry often have the misconception that one has to have access to large capital to be able to invest. But the truth is, there are a number of ways to make money in real estate, and not all will require a significant amount of investment.
To help dispel this notion, real estate investment company Offer Climb with branches in Phoenix and El Paso recently published an infographic detailing 4 popular strategies for investing in the US real estate market.
The “4 Real Estate Investment Strategies For New Investors” infographic provides a simple and easy-to-understand breakdown of the Flip, Buy & Hold, Wholesale, and BRRRR strategies. While there are a number of other real estate investment strategies, most will just be variations of these 4.
In the simplest sense, wholesaling involves finding buyers for sellers and taking a percentage of the transaction. The process involves “assigning” contracts, which means that you don’t really need to buy the property for yourself, you just need a “motivated seller”, or someone who needs to sell his property so they are willing to let it go at a price lower than its market value.
This is a good, fast way to make money off real estate that doesn’t require you to get hold of investment money. You do, however, need good leads so you’ll be at a disadvantage against investors who have already been working in the area before you.
To “flip” means to buy a property and then resell it. Property flippers profit by having the property appreciate in value by taking advantage of rising home prices in the area, or by fixing up the property. Similarly, the trick here is to find the undervalued property or ones that only need minor repairs, mostly for cosmetic purposes.
The whole process can take as little as a month and a half and yields reasonable profits. However, it will require you to get a hold of capital, which can be in the form of a loan.
Buy and Hold
Buy and hold strategies are for investors who want to take advantage of development in the area. What you want to do is purchase a property to let it appreciate, and at the same time rent it out so that you can get a regular, passive income.
The challenge here is securing tenants, and keeping rent prices enough that it sufficiently covers maintenance costs.
Buy, Renovate, Rent, Refinance & Repeat
The BRRR&R can be a long and complicated process, but it is a replicable model that brings short and long-term gains. It is very similar to buying and holding, but what you’re looking to do is to recoup your capital by means of refinancing, which means covering an existing loan with another loan with a lower interest rate.
It is a continuous process where you want to increase your profits by adding more properties to work on, although the main challenge would be securing a good refinancing deal with a bank.
Getting the hang of contract assigning alone may be enough to get you on track in investing in real estate, and as you pursue bigger deals in the industry, you’ll inevitably get into the other strategies as well. However, one very important thing to do as you begin would be to not do enough research. Even though the whole game plan is already laid out in the infographic, as well as on other real estate sites online, always be prudent and do your homework, and take in experience one deal at a time.