There are many different strategies in real estate. One can’t simply enter the industry, hoping for the best. It takes a lot of research, time, and patience to see results when investing in residential real estate, such as condos, small apartments, and large complexes.
Depending on what your long term goals are, these will dictate the strategy you choose and how much exposure you’re going to have to each one – whether you’re all in, or whether you’re going to use pieces of each one.
In this article, we break down the many different strategies you can choose when investing in real estate.
One of the first strategies most people often hear in real estate when they get into investing is “wholesaling.” This is where you find a motivated seller, you put the contract under agreement, and you go sell the contract to someone else.
Essentially, you get something under agreement, and you sell it for wholesale prices to an investor of either a flip or a whole.
Agency (Real Estate Agent)
This strategy is another form of getting into real estate and gaining an income from it that pays a little more or has more deals associated with it.
Being a real estate agent is going to allow you to meet with those same sellers (as the wholesale deals), but be able to close more often. Sometimes, you can sell it on the market as opposed to being forced to sell off-market like a wholesaler is.
Agency is another source of income, and additionally, you can get paid by working with buyers. It is much easier to work with buyers as a real estate agent with a higher percentage of commission more often closing.
Another form of income in real estate is being someone who does rehabs or “flips.” This involves buying a property from either a wholesaler or an agent and putting that property into rehabilitation mode.
Then, you would put that property onto the market and sell it for a higher price than what you purchased it for. In this process known as “flipping,” you have to make sure you purchased it right with a 65-70% ARV (After Repair Value).
After putting the renovation costs in, you want to make sure you’re still making a profit for yourself at the end after the sale, paying for the commissions, and after paying taxes.
This is the end goal for most real estate investors with the aim of moving towards it; however, in the beginning, a lot of people don’t have capital. While there are ways to buy property with or without capital, it becomes a matter of “whose capital it is.”
The concept of rental property (as discussed in a previous article) is essentially buying a rental property that pays cash flow, and over the long-term, it pays itself down. Depreciation is allowing the property to go up in value. Ultimately, depreciation is what will allow you to save some money on your taxes, and with amortization, it means your mortgage is getting paid down.
Cash flow is cash-on-cash return coming in after all of the rents and expenses are paid, including the mortgage. This is the key out of all of these business models – you want to make more money. Rental Property is more of the “retirement” end of the spectrum.
“Be The Bank” (Put Your Money To Work For You Passively)
This strategy is based on selling your assets with sell or financing – holding paper, doing hard money, or doing private money for other investors who are looking to get in the game. You take your money and putting it to work on the street.
This includes whether you’re selling a property that you already own through seller financing or going out, creating hard money, and selling your mortgage to someone else.
These are the major strategies for real estate investing and are important to think about when getting started in the business. I hope to see you at our next Free Live Webinar! You can register at GualterAmarelo.com/Live