Top Real Estate Strategies for Building Wealth

Real estate can be a lucrative investment, but there are many risks and considerations. It isn’t an instant money grind– it takes time, strategic investments, and value-building strategies to get the most from your returns. However, now is a good time to enter the market; post-pandemic, we’re seeing low prices and stable rent values.

Of course, not everyone chooses to rent their properties, as some investors prefer to rehab and sell. To help you get a feel for various ways to benefit from real estate investing, let’s take a look at today’s top strategies and what makes them popular.

House hacking is a great investment for beginners. It involves purchasing a property that will serve as your primary residence and a rental. This can be a single-family residence where you rent out extra bedrooms or a multi-unit condo where you live in one and rent out the others. The idea is that you start to build equity in the property; meanwhile, rental income from your tenants helps offset the mortgage and living expenses. It’s also one of the more affordable strategies for first entering the market.

The BRRRR method is a snowball rental method. You start by purchasing a property below market value and investing in renovations and updates to increase its value and curb appeal. Once the home is ready, you rent it out to attain a positive cash flow. Once that cash flow is stabilized, you refinance the property to pull out your initial capital and reinvest in another property.

Private lenders offer rental loans that can make this approach even more lucrative. They are easier to apply for than conventional mortgages and look at property potential over personal income verification.

You do need to have a higher starting investment for BRRRR as you need to work on increasing property value before you can start attaining rental income. Once you get the hang of the process and have a few properties, it becomes an efficient way to grow your real estate portfolio.

House flipping was popularized by the entertainment industry, but it is still a valid investment strategy. You buy a property below market value, rehab it, then turn around and sell it for a profit. You will need to develop a keen eye for properties with potential and a decent understanding of the current housing market—- or network with a trusted real estate agent who can help you choose properties and has insight into the housing market.

House flippers need to build a strong team of contractors, agents, and inspectors to navigate the renovations and learn the importance of accurate cost and time estimations. You need to understand how to work within your budget and maximize your profits during sales. After some experience, there are house flippers who decide to take a DIY approach, getting certified as contractors and learning the local building codes. 

Flipping can be a high-risk investment, but successful flips can be very rewarding.

If you’re looking for a more passive investment, consider working with a Real Estate Investment Trust or REIT. REITs are companies that purchase, operate, and finance income-generating real estate. They work similarly to mutual funds, pooling investments to fund their ventures and then returning dividends to investors.

REITs grant you indirect access to a diverse portfolio of properties, from residences to office buildings to shopping centers. You can publicly trade REITs through stock exchanges, so they are quite liquid.

The Buy & Hold method is a long-term investment strategy. You find a property with strong potential for appreciation, purchase it, and turn it into a rental property. You ride out the market fluctuations while the property gains value and generate positive cash flow through renting, occasionally increasing the rent as the property appreciates. You can then either continue to rent or sell at a higher price when the next strong seller’s market rolls around.

If you don’t have a lot of upfront capital, lease-to-own lets you rent a property with the intent to purchase it in the future. This is a great option if your credit score is less than optimal, as well.

By entering a lease-to-own agreement, you start building equity even while renting. In most contracts, a portion of your rent goes towards purchase. This lets you get a foot in the real estate market with your own property. Pending your lease-to-own agreement, you may be able to sublet rooms to combine house hacking with the lease-to-own method.

As you can see, there are many approaches to entering the real estate market and building wealth through rental properties and sales. What strategy works best will be up to you in the long run— in fact, you may decide to pursue different strategies based on the property in question. If you’re hesitant about getting started, there are a myriad of investment groups where real estate investors come together to learn from veterans, help new investors get their first properties started, and recommend strategies for potential properties.

You can also hire an investment broker or a financial advisor to help get a clear look at your current finances and what methods would work best with your current capital.

Starting is the slowest part of real estate investment. Once you understand the process and get a feel for the housing market, you can start maximizing your returns and generating more wealth.