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Tag: Real Estate Investing

  • 6 Effective Real Estate Investment Strategies

    6 Effective Real Estate Investment Strategies

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    Opinions expressed by Entrepreneur contributors are their own.

    As a real estate investor, you might encounter varying advice about investing on the internet, social media and from other investors. Some of these sources may claim they know best, but there are many effective strategies for investing in real estate. There isn’t a single strategy that is the best approach for every landlord. In fact, your real estate investing strategy should reflect your personal long-term goals, available resources and current circumstances.

    Plus, your investing strategy can — and should — change as your needs change. The success of your rentals isn’t tied to one investing strategy, but rather the skills you’ve built, the tactics you’ve learned and your ability to shift between different strategies when needed.

    Below are six great real estate investing strategies you may use at various points in your investing career:

    Related: Master These 6 Skills to Succeed as a Real Estate Investor

    1. House hacking

    House hacking is a popular investing strategy wherein you buy a property, live in half and rent the other half out. The rental income you receive helps reduce your monthly mortgage payments on the property.

    This strategy works well with duplexes and other multiplexes because you can maintain a clear division between your and your tenant’s spaces. However, some investors also rent out a basement or bedroom from their single-family home (SFH).

    House hacking is a trendy and widely used investing strategy for several reasons. For one, it’s an excellent way to transition to real estate investing for new landlords. This is especially true if you learn to manage your rented unit or bedroom with property management software. Software helps you carefully track your income and expenses while you establish your business. Another benefit of house hacking is that it allows you to get a residential mortgage because you’ll be living on the property as well.

    In the long run, this strategy’s aim is to make it possible for you to move out and transition the property into a full-blown rental.

    2. BRRRR deal

    BRRRR investing is another effective strategy made popular by Brandon Turner on Bigger Pockets. BRRRR stands for buy, rehab, rent, refinance and repeat:

    • Buy: Buy a property at below-market value.

    • Rehab: Renovate and improve the property by adding value.

    • Rent: Rent out the property to cover the mortgage.

    • Refinance: Get the property reappraised, then use cash-out refinancing to secure an advantageous mortgage.

    • Repeat: Use the capital you recovered from the deal to invest in more properties.

    With BRRRR, the idea is to capitalize on a property others may have overlooked due to its low face value or apparent lack of potential.

    To use the BRRRR strategy, target properties that are sound investments despite needing some work. Focus on improvements that increase value: installing hardwood flooring, adding extra bedrooms or remodeling kitchens and bathrooms. The value added from these improvements will improve your property appraisal and help you secure more funds to invest elsewhere.

    Related: 5 Tips for New Investors Who Want to Make Money With Real Estate

    3. Wholesaling/driving for dollars

    Wholesaling is a strategy many investors use to capitalize on great deals. In this strategy, you find a property that will make a good deal, facilitate a sale between a buyer and seller, and then collect the difference between the seller’s price and the amount the buyer pays.

    To succeed with this strategy, you need to be informed about which properties are currently on the market. You can use popular listing sites, the Multiple Listing Service (MLS) or a strategy known as “driving for dollars.” This involves manually searching neighborhoods for properties that look promising.

    One downside of wholesaling is that you need strong marketing and sales skills. If you don’t have this skill set and don’t want to work to acquire it, wholesaling might not be for you.

    4. Flipping properties

    Flipping properties is like BRRRR in that you buy, renovate and improve a property. However, with house flipping, the end goal is to sell the property, not rent it out.

    House flipping works best when you renovate and flip as quickly as possible. The longer you wait to sell, the more mortgage payments you must make. Like BRRRR, house flipping works best with properties listed at below-market value or those that are easy to improve at low costs. This way, improvements can significantly increase the property’s value and lead to quick turnovers.

    One downside to this strategy is that you’ll have higher capital gains taxes because you sold the property so quickly. You’ll also need help to successfully pull off house flipping — specifically, you’ll need a team of builders and renovators and access to high-quality materials at a relatively low cost.

    5. Syndications

    Syndication is often considered a more passive real estate investing strategy. However, with careful decision-making and an active eye on the process, syndication can lead to great gains. The main idea with the syndication strategy is to pool your funds with other accredited investors to buy real estate.

    Here’s how it works: You pay syndicators to locate and manage most deals, then benefit from the profit. Syndication can be public or private. Public syndication is usually operationalized through a syndication marketplace, while private syndication is managed manually by investors.

    Crowdfunding is a specific type of syndication investing that involves accredited and non-accredited investors alike who contribute and profit from deals. If you choose the crowdfunding path, you’ll work with a broader range of investors. You also won’t be expected to contribute as much entry capital as you would with traditional syndication (typically only around $50-$1,000 is required).

    If you choose the syndication route, be picky about who you work with. You want to ensure your investments are in good hands, even if you didn’t contribute as much initially.

    Related: 7 Common Mistakes Made By New Real Estate Investors

    6. Live-in-then-rent

    The live-in-then-rent strategy is a modified house-flipping scenario. Essentially, your property is a SFH (usually) that you live in initially and then turn into a rental after you move out. The main difference between live-in-then-rent and house hacking is that you don’t live in the property and rent it at the same time. Instead, these are two separate phases.

    Live-in-then-rent is a great strategy for people who don’t want to live closely with their renters but still want to participate in real estate investing on their budget.

    With so many ways to invest in real estate, it may seem challenging to devise a strategy that meets all your needs. However, by catering your investing strategy to your particular goals, you can successfully cultivate your real estate business.

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    Dave Spooner

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  • 7 Common Mistakes Made By New Real Estate Investors

    7 Common Mistakes Made By New Real Estate Investors

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    Opinions expressed by Entrepreneur contributors are their own.

    Real estate is one of the safest ways to create lasting wealth, and it is attracting more and more people each year. Investing in real estate is an exciting and lucrative adventure, provided that you don’t fall into the pitfalls of the sector. The lack of experience of beginner investors can cause them to fall for many tricks. So, here are seven common mistakes to avoid at all costs if you’re a beginner who wants to succeed in the real estate industry:

    1. Thinking that you will get rich quickly

    One of the major mistakes beginner real estate investors make is that they often think that the results will be tangible quickly. That is the outcome of the internet phenomenon: The public wants everything right away and without making any effort. Many industry gurus focus their communication in this direction, and they do not show that in order to succeed, it is necessary to have a spirit of self-sacrifice and also to work hard. In reality, patience and perseverance are required in this type of investment. Just searching for a profitable property can take several months if you don’t have a keen eye. Moreover, rushing into an investment without checking the property in question is often a bad omen.

    Related: A Beginner’s Guide to the 5 Easiest Ways to Become a Real Estate Investor

    2. Not having a strategy

    Some real estate investors prefer to take projects one day at a time, without having a precise plan of action. In this case, the risk is to end up with several properties which do not correspond to their profile. These investors embark on all sorts of projects without measuring the consequences, and they often find themselves ruined because of their poor investment choices. Having a well-defined strategy allows you to go in a precise direction. Following a strategy means ensuring that you don’t venture out in all directions and that you move in the right direction.

    3. Focusing your research on a specific city

    Another major mistake often made by beginner investors is focusing on a specific city — often close to their home or in a particular city because they have been told that its profitability is good. In reality, this way of searching drastically reduces the opportunities since these investors will feel obliged to buy a property in that city, even if the profitability is not there. On the contrary, it is necessary to expand the search in order to not miss any opportunities. It is easy to optimize the profitability of a property that is already profitable beforehand. On the other hand, a property that is not profitable will harm your project, even if you set up some optimization strategies.

    4. Omitting the negotiation stage

    In real estate, negotiation is a key step that takes place at different levels. In particular, it intervenes at the time of purchase of the property. Many real estate investors forget that a good deal is made at the time of purchase. If they buy at a too high price, that will impact the profitability of their project, whether it is a rental or a resale project. The purchase price constitutes an important variable in a real estate investment project. Keep in mind that if you don’t get a good deal at the time of the purchase, it is very likely that you won’t get a good deal on the resale.

    Related: How to Avoid the Common Pitfalls of Real Estate Investing

    5. Underestimating the cost and the scope of the work

    It is important to seek the help of professionals when you are tackling work related to real estate because costs can quickly become overwhelming. Often, beginner investors have no idea of the scope of the work to be done, and therefore they underestimate their costs. They only have a global or a partial vision of what they want to achieve, and they do not realize that the work can be much more consequent.

    6. Not checking the condition of the property

    Even if virtual visits are at the present time facilitated by technology, seeing the condition of a property in person allows you to check if it corresponds to your expectations. There is no point that can be neglected at this stage. It is particularly necessary to check the state of the common parts as well as the state of the roof, for example, with the help of a drone in order to be more precise. While visiting a property, it is also important to check the condition of the neighborhood. All this is done in order to avoid very high costs of work.

    7. Thinking that you can handle everything yourself

    In the real estate field, beginner investors tend to think that they can handle everything, either to make a bigger profit or simply because they find it difficult to delegate some of their work. This is a common mistake, as the time spent in the management of a property is valuable time that they can allocate to tasks that are more within their reach, such as searching for other properties or finding some solutions to optimize the profitability of a property they possess. In some cases, delegating this responsibility to professionals is a better solution. But be careful, delegating does not mean not controlling. It is necessary to think of always monitoring the state of the work.

    Related: Master These 6 Skills to Succeed as a Real Estate Investor

    If you’re just getting started in real estate investing, use these tips to avoid common mistakes. Remember this: It takes time to see results, don’t go in without a strategy, don’t limit your search, don’t skip the negotiation stage, don’t underestimate the cost or the work, thoroughly check the condition of the property, and don’t hesitate to delegate the work.

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    Xavier PRETERIT

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  • How to Make Money on Airbnb

    How to Make Money on Airbnb

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    Opinions expressed by Entrepreneur contributors are their own.

    Investing in real estate is good for people who want to make money work for them. And this is because, with real estate investments, you can buy a property and use it to earn more. Now there are many ways to use an acquired property for profit. But perhaps the ones that are gaining more traction are short-term rentals on Airbnb.

    But what is Airbnb?

    If you’re an avid vacationer, you’ve probably heard of the app that can connect you with people who will let you stay on their property for a period of time. This app, called “Air Bed and Breakfast” or Airbnb, was launched by two industrial designers who moved to San Francisco in 2008.

    They couldn’t afford to pay rent for their apartment during this time, so they decided to earn extra by letting people who couldn’t find hotels rent their space temporarily. And long story short, their strategy became a massive hit because it expanded into a vast network of 4 million hosts worldwide. And up until today, their platform continues to create more opportunities for hosts and real estate investors in general.

    Related: Airbnb CEO: It Took Us 12 Years to Build, and We Lost Almost Everything in 6 Weeks

    Long-term vs. short-term rentals

    Real estate investments include property rentals, and there are two main ways to earn from them: Long-Term Rentals and Short-Term Rentals. When I started as a real estate investor in 2012, all my properties were long-term rentals. But in 2017, I transitioned all of them to short-term ones, most of them through Airbnb.

    Why? There were a lot of factors that made me decide to go all-in with Airbnb:

    1. You make less money on long-term rentals.

    Did you know that when done correctly, you can make a $2,000 average monthly profit on Airbnb? Of course, many things must be considered to get to this number. Plus, you can make less or more than this amount every month.

    But the point is, with Airbnb short-term rentals, you can determine your price, and no other person has a say. You can’t do this with traditional long-term rentals. With long-term rentals, you can only set a fixed amount and increase your rent by 3% to 5% a year.

    2. You are under bigger obligations as the landlord.

    There are several things to consider when hosting a long-term rental, and one of those is that your tenants may never deep clean or take care of repairs on your property. The reason is simple: they won’t be staying there forever. Ultimately, the obligation still falls on your shoulders.

    Another fact worth mentioning is that you won’t be able to evict your tenants easily. Now, the stipulations change from city to city and state to state, but typically after 30 days of staying, your guests acquire certain rights.

    Case in point: In 2020, the government passed an Eviction Moratorium where landlords are not allowed to evict their tenants on the grounds of non-payment. This was, of course, helpful for a lot of tenants all over the country. But now, some landlords are still owed thousands of dollars in back rent, and they may never get the chance to go after them again.

    3. With Airbnb short-term rentals, you don’t have to work like an employee.

    Short-term rentals are passive in nature, which means that if you have a property, you can still earn even if you’re not around. Add this to Airbnb’s online platform, and your market potential gets wider.

    But here’s the thing: you may still be trapped by working around the clock to manage your listing. Thankfully, there is a way to build a system and create a team that operates the business on your behalf. We use this innovative business model with Airbnb, which has since accelerated our cash flow and offered tremendous growth.

    4. You don’t have to buy properties to get started.

    If you’re familiar with cash flow goals for long-term rentals, you’ve probably heard that the aim is to earn $200 per unit per month. This is all well and good, but if you’re trying to replace a job that gives you $5,000/month, this income won’t give you much. You still need to own at least 25 units to get there.

    So what you can do instead is to buy a couple of units, give them a nightly rate, and launch them on the platform to start getting bookings and recover your returns faster.

    But what if you don’t own properties and still want to do Airbnb? Well then, all you need to do is apply the Arbitrage Model.

    The Arbitrage Model, also called subleasing, is where you rent properties from other landlords, get their permission in writing, and then launch their property as your short-term rental on Airbnb. Yes, this strategy is perfectly legal and lets you start a business without buying properties.

    Related: How to Make Money Online: The Basics

    Are there other ways to start an Airbnb, even if you don’t own properties?

    Yes. Aside from subleasing, there are two more ways to launch an Airbnb business without much capital.

    1. Co-hosting

    With the co-hosting strategy, you don’t have to buy or own properties because all you have to do is to manage and help hosts manage their listings. This method allows you to learn more about the business and earn.

    2. Using O.P.M (Other People’s Money)

    A balance transfer is when you transfer the money available on your credit card into your checking account. You can then use this money to sublease a property and start your own Airbnb business without using any of your money.

    Airbnb is a great platform for real estate investors. Its innovative business model will allow you to create positive cash flow, get started even if you don’t own properties yet, and enjoy the time, location, and financial freedom that most people only dream about.

    Related: How to Start a Business with Only $1,000

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    Jorge Contreras

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