Looking to invest in real estate? Here are 5 common ways people invest!
1) Flips
This is where you buy a run down property, renovate it and sell it quickly. It takes a lot of capital and a lot of expertise and hands-on time to do this effectively and quickly.
When you stop flipping, you stop making money!
Many times flippers will reinvest profits into the next deal, and some also keep a few properties as rentals in order to keep cash flow going when/if the market turns and they’re unable to make as much on a flip.
2) Short term rentals
With a short term rental you’re buying a property in an area with high tourism and renting it out on a short-term basis. This requires a medium amount of capital and a high amount of time because you’re really running a full fledged hospitality business.
Depending on your lender you’re able to buy the property with a loan, renovate and finish the property and then start running the business.
For people with full time jobs the time commitment can be challenging, but it’s a great way to earn a higher return on a property than with a traditional long-term rental, especially in desirable markets.
3) Long term rentals
This is where you buy a property and rent it out to traditional long-term tenants. You might make less than a short term rental, but your time investment is way lower as well.
Depending on the market you’re buying in, this could require high capital as well because you’ll need to put more down for an investment property than for an owner occupied property.
However, once you’ve gotten the place rent ready, time commitment can be pretty low.
4) House hack
When you house hack, you’re basically taking either the short-term rental or the long-term rental strategy but you’re living in the property yourself!
This allows you to buy with much lower down payment because you are an owner occupant.
With house hacking you’re either renting out the other units in a 2 to 4 unit property, or renting out rooms in a single-family. You can find several creative ways to make money from your own home — the goal is to lower your own housing expenses as much as possible.
Usually this will allow you to enter real estate investing with the least amount of capital possible.
5) Syndications
A syndication is where you find a group you trust that’s buying property and managing it for you. You’re usually able to get in for a much lower investment than buying your own property, and you don’t need to worry about qualifying for the loan.
This allows you to enter real estate with some of the least amount of capital, without being an owner occupant.
By investing in a group, you’re able to invest in markets you might not be able to otherwise because of cost, but you still benefit from cash flow and appreciation.
This strategy requires the least amount of time, and usually the least amount of capital for non-owner occupied investments.
Active vs passive!
#1 and #2 I would consider to be real estate-related jobs. They require you to run a business. (Whether it’s a side hustle or full-time depends on how many you are doing at once!)
I don’t recommend these strategies to people who like their job, or don’t have a lot of time to spare.
#3 is a medium amount of time, you could definitely scale it up to be full time, but you could also keep it pretty minimal as well.
#4 and #5 are great for people who have less time to invest; the rewards may not be as large or immediate as flipping or AirBNB, but they require significantly less startup time and costs to put into practice!
Moral of the story: there is something for everyone, and it all depends on your goals and capital available.
I’m happy to set up a call to talk through your goals with you! www.lyonideas.com/call
Which of these is most exciting to you and why?
Sammy Lyon
REALTOR®️
DRE #02113227
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Dow Capital
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