For those interested in investing, it’s important to understand that there isn’t just one route you can go. The investing options in the world of real estate are both vast and diverse, so this list won’t cover every option, but it will cover the most common approaches that are pursued by investors as they become interested in this new way to make money.
Here is a breakdown of the three most common real estate investing approaches:
This approach is often referred to as buy and sell. This has always been a viable strategy for investors, but it just recently grew in popularity over the past decade. You may have heard of television shows such as Flip or Flop, Flip This House, Masters of Flip, Flipping Out, all which follow individuals and couples as they go through this process from start to finish.
Flippers will purchase homes for way below market value and put money into doing all of the necessary remodeling and renovations. Once they have completed their work, they will then sell the home at a higher value, thus making profit from the original amount they paid – even including the money that was put into completing the remodeling and renovations.
This approach is often referred to as buy and hold. This is the real estate investing strategy that is the most recognized, as it is what a significant amount of the population does. 36.6 percent of homeowners do not actually own their home and, instead, pay rent to a landlord or company.
One concern that people have with renting is that it requires a fairly significant financial sacrifice at the onset. One workaround for that, which is more common for younger investors, is to purchase a duplex or triplex and live in one of the units. If you have other tenants living in your building with you, not only can you live for free, but you may only need to put 5 percent down since you will be occupying the property – saving you money.
With wholesale investing, someone is keeping an eye on the real estate market for you. Their goal is to spot potential homes that will go into foreclosure before that would actually happen or find individuals who are looking to sell their homes before they put them on the market. With the list they have compiled, wholesalers, then, reach out to investors who are interested in purchasing certain properties at better deals, since they haven’t yet been made public.