The Ultimate Guide to Real Estate Investment Strategies for Entrepreneurs

If you’re like most ambitious investors, your goal is always to find a compelling way to increase your income and grow your assets. Your wheels are constantly turning as the search presses on for a hot stock, a small business opportunity, or a winning lottery ticket. Stocks might scare you a bit, and odds of hitting the Powerball…well, no explanation necessary.

You do have some friends who seem to do pretty well as landlords. They take a few nice vacations, drive new vehicles, and haven’t ripped out their hair. You’re a homeowner and a do-it-yourselfer. You ask yourself, “how hard could the real estate investing business be?” One solid bit of advice: believe only half of what you read and an even smaller percentage of what you hear from others.

You need to dive into the pond yourself to find the truth!

A second enormous piece of advice: don’t go in headfirst until you know how cold and deep the water is. As with other money-making opportunities, real estate investing requires commitment and knowledge on your part. There are likely many more episodes of failure for every success story you hear.

There is a difference between winning and losing that hinges on a well-executed real estate investing business plan. In what follows, we present a detailed guide to entrepreneurs’ best real estate investment strategies.

The Top 4 Real Estate Investment Strategies Guide for Entrepreneurs

Let’s dive into the top real estate investing strategies for ambitious entrepreneurs.

  1. Renting

Many new real estate investors start with a rental strategy, often renting out a property they already own after moving into a new residence. The benefit of rentals is that they generate a passive, steady income every month, which is hard to achieve with other strategies. The downside is that being a landlord can be a hassle, between problematic tenants, ongoing maintenance, and overall liability.

In addition to this kind of traditional renting, there are many kinds of rental strategies, including:

BRRR stands for buy, rehab, rent, refinance, and it’s exactly what it sounds like. You buy a distressed property at below market value, rehab it, rent it out at market rates, and then refinance the home at its full market value so you can invest the capital in another property. This may sound like a great way to game the system and generate cash for investments, but the BRRR method has many potential pitfalls for inexperienced investors. It relies on you finding the perfect, undervalued property that’s not a money pit and can be renovated quickly and inexpensively. Then, you need to find reliable renters who will pay market rates on time every month. Finally, you need to transition from a short-term hard money loan to a cash-out refinance loan, which can be a hard sell to banks if you’re an inexperienced investor and haven’t built up enough equity.

House Hacking, another popular rental strategy with new investors, involves renting out part of a property you’re also living in. Traditionally, you purchase a multi-unit property, and then live in one of the units while renting the rest out. Some investors purchase a single-family home, live in one of the bedrooms, and then individually rent out the rest of the bedrooms. Either way, the goal is to save money by living in your investment property, while charging enough rent to more than cover the cost of your mortgage. The risk of house hacking, especially with multi-unit properties, is that you may not find enough renters or be able to charge a high enough price to cover the mortgage. Plus, on-site living means you’ll see your tenants every day, which can lead to some uncomfortable situations, not to mention people knocking at your door at all hours of the night to fix minor issues or handle disputes.

Short-term/AirBnb, while this strategy can be combined with house hacking, I’m going to focus on traditional short-term and Airbnb rentals, which involve purchasing a property and renting it out on a nightly or weekly basis. This can be a very profitable real estate investment strategy, especially in areas with a lot of tourism. However, you need to brush up on the local short-term rental laws in a city before you purchase a property, because there has been a recent spike in legislation aimed at preventing investors from renting out vacant homes in this way. In addition, Airbnb rentals are relatively high-maintenance, requiring more amenities, furnishings, and attention than long-term rentals.

Overall, you’ll need to assess your experience level, finances, and overall goals before choosing a rental real estate investment strategy.

2. House Flipping

House flipping, also known as “fix and flip,” is one of the most well-known real estate investment strategies, due in no small part to TV. This strategy involves purchasing a distressed, undervalued property, renovating it to its full potential, and then selling it for total market value. Your goal is to finish your renovations and sell the property as quickly as possible to minimize your holding costs and maximize your return on investment (ROI). That means you could potentially earn money very quickly. However, you’ll need to work very hard for that money—house flipping is not a passive form of income. You’ll need to chase down leads, perform construction work (or hire contractors, which eats into your ROI), market the property, and sell it, all in a concise time frame. This can be overwhelming for new investors who don’t have any DIY experience or contacts in the field. However, this can be a promising strategy with the proper house flipping training and support.

3. Wholesaling

Wholesaling is another short-term investment strategy like house flipping. As a wholesaler, you look for cheap properties, buy them for a very short time frame, and immediately sell them to another buyer. Generally, wholesalers have a trusted network of fellow real estate investors interested in buying cheap homes in poor condition, and who have access to capital for quick deals. Since you’re only holding the property for a short time, and you’re not making any or very few modifications or repairs, wholesaling can be more inexpensive than flipping and often carries less risk. However, it can be difficult to find leads on good wholesaling properties, and even harder to find interested buyers who are willing to make quick cash deals. But, if you have solid lead generation methods and access to a network of investors, wholesaling can be a lucrative real estate investing strategy.

4. Wholetailing

Real estate wholetailing is like a combination of house flipping and wholesaling. The idea is to find a cheap, distressed property that needs a few essential repairs to become sellable. Instead of fully renovating the home, you make these high-impact repairs to make the property safe and attractive. Then, you sell the property as quickly as possible at a discounted price, which means you can market the home both to fellow investors looking for a flip, and to regular home buyers looking for affordable housing. Wholetailing carries the same benefits as wholesaling, with the added advantage that you can wholetail without an extensive professional network of investors. You just need to know how to assess a potential lead to determine whether or not it’s a good candidate for wholetailing, which can be challenging without experience, training, and/or excellent property valuation tools.

Proven Real Estate Investing Strategies for Entrepreneurs

Ultimately, you can make any of these real estate investment strategies work if you have the right education, tools, and support. As an entrepreneur, you can gain access to all that and more by joining the HomeVestors® team. Independently owned and operated HomeVestors franchisees benefit from a sophisticated network of professional real estate investing franchisees and dedicated Development Agents who bring years of experience to the table. 

Becoming a franchisee puts you in the seat next to some of the most knowledgeable folks in the industry. HomeVestors’ real estate investment strategies have helped franchisees buy and sell over 125,000 houses since 1996.

Contact HomeVestors today to access proven real estate investing strategies for entrepreneurs.

Each franchise office is independently owned and operated. 

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