Whether you’re new to real estate investing or on the cusp of financial freedom, successful real estate businesses require a clear investment strategy to reach their end goal. If you’re seeking to build wealth and advance toward your business goals, it's crucial to match your investment strategy with your property plan and current investment funds.
To help you add a competitive edge to your real estate investment business, we've compiled this list of expert real estate investment strategies. Let’s dive in and explore 5 types of investment strategies that will help you go beyond the basics:
Fix-and-Flip
The fix-and-flip method is a popular real estate investment strategy. It involves purchasing a property, renovating it to add value, and then selling it for a profit. This strategy appeals to investors who are skilled at identifying undervalued properties and can effectively manage and oversee renovations. The key to success with fix-and-flip is to carefully calculate renovation costs, accurately assess the potential resale value, and execute renovations within a reasonable timeframe to maximize profits.
Live-In Flip
While both the fix-and-flip and the live-in flip strategies involve renovating low-value properties to sell for a profit, a live-in flip involves living in the house while it is being remodeled. This option could be a wise move for the frugal investors who are starting out with lower funds.
A large advantage of buying a home and making it your primary residence while you renovate is the tax savings. According to the Section 121 exclusion, if you have lived in a home for at least 2 years after it was purchased, you will not need to pay capital gains tax once you sell the property. This can equate to a saving of hundreds of thousands of dollars.
BRRRR
The BRRRR strategy, which stands for buy, rehab, rent, refinance, and repeat, builds on the basic fix-and-flip strategy. This is a great option for investors who want to acquire and grow their real estate portfolios while maximizing returns with passive income.
Like a standard fix-and-flip, the BRRRR method involves buying and renovating a distressed property. The difference with BRRRR is that you don’t just resell the property, you rent it out, and then refinance it to pay off the initial loan, using cash-out proceeds to buy more properties to continue building your wealth.
While this can open doors to amazing returns, fix-and-flip ventures require careful planning to manage the risks involved. Before diving into a flipping venture, it's wise for investors to do their homework, put together a solid budget, and really get to know the local real estate market.
House Hacking
Another way to acquire and take full ownership of a property is by using the house hacking method. House hacking is a savvy way for investors to expedite their mortgage repayment process for a multi-family property. This method entails purchasing a multifamily property, residing in one unit, and renting out the additional units.
The passive income generated from these rentals can significantly contribute to paying off the mortgage, offering a practical solution to homeownership and financial freedom. This strategy opens up many new opportunities to boost real estate investment and expand your business through passive income and property ownership.
Rental Debt Snowballing
For seasoned real estate investors who have a portfolio of successful investments under their belt, rental debt snowballing is an amazing strategy for securing financial freedom. It can be riskier for less experienced investors because it requires being able to manage multiple properties, units, and tenants while ensuring you pay off a large sum of debt.
The rental debt snowballing strategy involves acquiring multiple rental properties and using the passive income generated to pay off each property's debt. This strategy might not suit new investors, but for seasoned ones with a firm grasp of the real estate investment process, it can be a challenging, yet rewarding opportunity.
A well-defined investment strategy aligned with your property plan and available funds is the cornerstone of a successful real estate business. By thoughtfully matching these elements, you can effectively build wealth and move closer to achieving your financial goals.
Ready to make your next move? Explore our loan programs at SkyBeam Capital to find the best funding process for your real estate investment strategy.
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