For new investors, getting into the business of buying, selling, and renting homes may seem pretty ambitious.
But like any other area of personal finance expertise, real estate investing boils down to some simple basics. With the right strategies, patience, and a willingness to learn, it’s a discipline that can help you make strides on the path to financial independence.
Strategies for real estate investing
Today’s infographic comes to us from Offer Climb and it dives into four timeless real estate investing strategies worth knowing.
Whether you aim to do a quick “lipstick” flip or you’d prefer to generate passive income over time, here are the details and resources needed to execute on each strategy.
Although buying and holding is the most common and traditional strategy used for real estate investing, there is actually a variety of different strategies used. Some of these are simple and can be executed in just days, while others can be used on an ongoing basis to create long-term value.
How does each strategy work?
The appropriateness of each strategy below depends on your goals, risk tolerance, and local housing market. For the average investor, it is obvious that some of these strategies would also not likely be suited for booming markets like San Francisco, New York City, Vancouver, or Toronto, where multi-million dollar prices are the norm, and bubble risk is higher.
1. The “Lipstick” Flip
The first impression of a house is incredibly important. The “Lipstick” flip involves buying a house that can be easily improved, and then making minimal cosmetic improvements and repairs to sell for a better price.
For the right property, taking the time to fix small issues with flooring, walls, landscaping, and paint can pay off almost immediately.
2. Buy and Hold
This is one of the oldest strategies in the book, and it’s designed for long-term passive income.
By purchasing a property and leasing it to tenants, it creates a stream of monthly cash flows, and even offers potential tax benefits for the owner.
This has similarities to flipping, but involves finding a buyer for a seller and taking a percentage off the sale. If done right, this can be done quickly and with minimal risk.
4. Buy, Renovate, Rent, Refinance, and Repeat
Likely the most complex strategy in real estate investing for beginners to follow, this can ultimately be used to provide benefits in both the short and long term.
It involves four steps: buying a property, renovating it, renting the property out to tenants, and then refinancing the mortgage later on. Then the process repeats itself.
Of course, this strategy works best in places where property values are rising fast.