9 Most Popular Real Estate Investment Strategies
When investing in real estate, only one strategy works as well as the others. Depending on your investment goals and the stage of your portfolio, you will likely employ multiple strategies to grow what you have. As your needs change, your investment strategies will understandably change as well.
Here are the best real estate investment strategies to increase your money and grow your portfolio.
Dig Into Comprehensive Market Research
Market research will tell you much about whether a given property is worth the investment. Here is a rundown of where to start in conducting comprehensive market research.
To gauge profitability, examine local and national real estate trends. Analyze property prices, demand, and economic factors influencing real estate investing.
Evaluate the historical performance of real estate in specific targeted areas, identifying appreciation rates, rental yields, and vacancy rates. Use a data-driven approach, considering the neighbourhood and its performance.
Focus on Investing in Stable Residential Rentals
Single-family homes or multi-unit dwellings in locations with high employment rates and proximity to schools or public transport are the best real estate investments for rentals. Many investors focus exclusively on residential rental units in areas with low vacancy rates. However, This requires ongoing management and may necessitate upgrades and renovations as needed. It increases rental value and improves tenant retention rates.
Invest in Tax Delinquent Properties
Tax sales occur in every jurisdiction in Canada. It’s a major opportunity to buy tax delinquent properties. The municipality picked up these homes because of the failure to pay property taxes. They are then auctioned off or sold by public tender to the highest bidder at a fraction of its assessed value, allowing the municipality to recoup the property taxes owed. For an investor, it’s a way to buy a cheap residential home and generate a sizeable return fairly quickly.
Simple Buy-and-Flip Properties Target a Sale and Not a Rental
When you flip a property, you buy, renovate, and sell it. Buy-and-flips are not meant to be converted into rentals. House-flipping works best when you flip as quickly as possible. The longer you wait, the more you pay into the mortgage and are stuck with those bills. For the most profitable properties in this strategy, look for homes below market value and those that easily increase their value at minimal cost.
Invest In Vacation Properties for Short-Term Rentals
Look at tourist hotspots where there is a demand for short-term rentals. Purchase real estate here, fully furnish it, and equip it for guests. It may take some ongoing management, but properties like this can be used to build out a short-term rental portfolio. Before doing this, ensure you are aware of local regulations and tax requirements, as some jurisdictions do not allow services like Airbnb to operate or may have higher-than-expected taxes.
House Hacking
House hacking is a popular strategy in which an investor buys a property to live in half and rents the other half. The rental income is then used to reduce monthly mortgage payments. Whether it’s a duplex, multiplex, home with a basement or an extra bedroom, these are all house hacking opportunities. If you are venturing into real estate investing, house hacking is a more inexpensive way to start where you immediately benefit.
Utilize the BR Strategy to Buy, Renovate, and Rent
Use a strategy to capitalize on real estate that needs to be noticed because of a lack of curb appeal or perceived lack of potential. Find and purchase real estate at below-market value. Renovate the property and improve it by adding value. Then, set up the property as a rental to cover the mortgage.
Have the property reappraised. Use cash-out refinancing to secure a better mortgage. With the capital you recover from this process, invest in more properties and repeat the cycle.
Form or Join a Real Estate Investment Group
A real estate investment group, or REIG, is where multiple investors pool their money to increase their buying power. For you, the investor, it minimizes your upfront costs while sharing the risks and profits. Many REIGs already exist and can save you time and effort when looking for and considering new real estate on the market. Before joining a real estate investment group, evaluate their track record.
Wholesaling to Create and Capitalize on Great Deals
Find a low-priced property, such as a tax-delinquent home, if you know of an owner looking to sell. When you wholesale, you facilitate a sale of real estate between a buyer and seller. The difference between the seller’s price and the amount the buyer pays is what you collect.
To do this, you must be fully knowledgeable of current real estate listings. It will likely involve manually searching and researching neighbourhoods for the most promising homes.
