Whether you are an experienced real estate investor or just getting your feet wet, there are many ways to turn a profit. Some of these ways are long-term, while others result in quick revenue. The approaches you choose will depend on your experience, resources, and objectives with respect to real estate investing.
Buy and Hold
One common strategy for real estate investment is buying and holding property. This is done with rental property—you purchase a house or multi-family unit and lease it out to tenants. This can bring in a great deal of revenue, but it also has its own associated expenses. You take on numerous responsibilities, such as keeping the property maintained, as well as a certain amount of liability, such as making sure tenants don’t diminish the property’s value overmuch.
Rather than take on the long-term commitment of buying and holding, many investors flip properties. They purchase houses at competitively low rates, then sell them at a higher value. Often, they’ll fix them up in the process in order to improve their resale value, but this isn’t always necessary.
Many investors get their start in property flipping because it’s fairly straightforward. With the right strategies, it can turn a comparatively quick profit.
Much like house flipping, wholesaling can bring in revenue very quickly. Unlike flipping, however, you never actually purchase the property with your own money. Instead, you often negotiate a double close—the buyer sells to you, and within minutes or hours, you sell it to another buyer for a profit rather than spend time building equity. Alternatively, you have the contract assigned to you, after which you sell it before it closes. If it doesn’t sell, then you cancel the contract.
This is probably the fastest way to profit from real estate, but it typically requires an extensive network of buyers and sellers in order to pull off effectively.
In a real estate investment trust, or REIT, you get a share of ownership in a commercial real estate portfolio. The trust maintains the properties in its portfolio, and it passes on profits from those properties to its investors in the form of dividends.
This is a fairly simple way to invest in real estate, and you avoid the burden of having to maintain rental property yourself.
With the surging profitability of real estate in the nation, there are many markets that are extremely competitive. These offer highly valuable investment opportunities, but the competition may offset their profitability. An alternative approach is investing in secondary markets—cities and jurisdictions that don’t have as much competition as larger municipalities.
Finding up-and-coming markets requires careful research and involves a certain amount of risk, but they allow you to profit from your investments without having to worry about the heavy competition present in other areas.
Protecting Your Investment
Regardless of the strategies you use, there is one factor that remains constant—the need to protect your investment. Contracts, transactions, liabilities, and legal obligations all need to be handled carefully, and in order to do that, you’ll need some legal savvy on your side. Hart David Carson LLP can provide you with the legal services you need when delving into real estate investment.