Investing in real estate is an exciting endeavor that can lead to significant financial growth. But not only are there different types of real estate properties you can invest in, but there are also a number of strategies you can use when investing.
It's important to know about the strengths and weaknesses of each strategy that you can pursue. From there, you'll be able to determine the best course of action depending on your investment and financial goals.
Keep reading for the top four real estate investment strategies that you should consider in order to grow your wealth.
1. Buy and Hold
The buy and hold strategy is the most popular real estate investment opportunity because it offers both short-term and long-term value.
Buy and hold means you invest in a property (single-family home, raw land, condo, etc.) with the intention of holding it for the foreseeable future. The goal is to hold onto the property while its value appreciates over time so you can then sell it and get a large return on your initial investment.
This option also offers short-term value because, for example, if you buy a single-family home, you can rent it out to tenants while you're holding the property. Oftentimes, renting out the property will give the investor enough money to cover the monthly mortgage payments (if they have any) as well as some extra money to spend on fixing the place up and managing it.
This strategy is pretty much risk-free because the real estate market grows naturally over time due to inflation and growth of the economy. Even taking into account potential future housing market drops, a home's value will appreciate beyond that.
The only negative to the buy and hold strategy is if you want to rent out your home for short-term income, you'll need to deal with tenants and maintenance of the home, which can be time-consuming and stressful. That's why it's important to hire a property management company that can handle all of those duties without you having to lift a finger.
2. Fix and Flip
If you have money to spend on fixing up an old, worn-down house, the fix and flip strategy might be right for you.
This strategy involves finding a house that is run-down and in need of some serious TLC. But you shouldn't just find any old house. You want to find one that is in a good area with real estate properties in high-demand. If you find a house that is significantly less expensive than others in the area due to it's foundational or aesthetic issues, that would be a great option for a fix and flip investment.
This strategy is best for people who have the money to both purchase the home upfront, and fix it right away. Some houses require a ton of care in order to increase in value. But if you find the right house in the perfect area, you can make a ton of money after fixing it up.
If you're looking to make an investment and get a quick return, this is a solid option. The main setback here is that you have to gamble on the fact that the house will sell for more than what you're spending to buy and fix it. You also have to hope that it sells quickly.
Another setback of this strategy is it's not a long-term investment. You'll get your return relatively quickly, and then you'll want to invest again to keep getting income.
3. Airbnb Investment Property
Airbnb has become a huge force to be reckoned with and cannot be ignored by real estate investors any longer. Airbnb investment properties allow entrepreneurs to potentially make a ton of money each month if they play their cards right.
First, you'll want to buy a property somewhere that has a lot of tourism so there won't be a shortage of people looking to stay at your property. Then, you need to make the property unique and add amenities that are inexpensive but will lead to people willing to spend more to stay with you (snacks, local tips, bikes to use, etc.).
You can literally make hundreds of dollars a night from renting out your property if you do it right and take care of the home.
There are a few setbacks to this strategy, however. If you're an Airbnb host, you'll need to be a lot more involved than you would with other types of investment properties. Another setback is there can be stretches of time where your home won't be booked for a stay, so you won't make any money. Also, Airbnb takes a chunk of what you make from each booking.
4. Real Estate Investment Trust
A Real Estate Investment Trust (REIT) is when you pool your money with a group of other investors to buy a piece of real estate. This strategy is generally used for large real estate properties, such as strip malls, office buildings, or apartment buildings. Think of this as something similar to buying shares in the stock market.
REITs are very passive and you won't need to worry about maintenance or finding tenants. You just have to invest in some money and sell your shares when you think they have the most value.
If you're looking for the most hands-off strategy, this is it. However, it comes at a price as you probably won't get as much in returns, and it's hard to determine when the best time to sell your shares will be. You also won't be able to make executive decisions over the property, giving you a lot less control.
Real Estate Investment Strategies: Get Help from the Pros
If you're looking for the best long-term real estate opportunity, buying and holding is the way to go. Not only can you make money in the short-term by renting out the home, but the property will appreciate in value over time.
Are you ready to use one of these real estate investment strategies to grow your wealth?
Here at Professional Real Estate Management and Investment Services Inc, we will help you find the most valuable properties in the Pinellas County area. We'll also handle all of the property management duties, so you don't have to.
Contact us today to learn more about our services and to start your journey towards a wealthy and fruitful future.