Real estate is an attractive investment if approached strategically. The right investment strategies help you maximize returns while minimizing risk. Choosing the best approaches depends on your budget, time horizon, and risk tolerance. The most popular long-term strategy is buying investment properties and holding them to generate rental income and benefit from appreciation over time. Focus on acquiring properties in markets with strong housing demand and consistent value growth. Maximizing cash flow from rents and minimizing costs makes buy-and-hold properties lucrative over decades.
Fix and flip
For investors with remodeling skills or capital to hire contractors, fixes, and flips can provide a nice return. You buy an undervalued or distressed property, renovate it, and then sell it quickly for a profit. Creating curb appeal and upgrading kitchens, bathrooms, and systems that buyers want generate big value. Many fixers sell in just months for 20%-30% gross margins.
Wholesalers find discounted properties in need of rehab, get them under contract, and then sell them to investors who will fix and flip them. The wholesaler’s fee is the difference between the contracted purchase price and the higher price they flip it for. This strategy generates quick payouts without financing or repairs, but finding deals takes work.
House hackers live in one unit of a small rental property and rent the other units to cover or exceed their housing costs. This saves money while building equity and generating rental income. Multi-family properties like duplexes work best for house hacking. Savvy investors get others to pay their housing costs.
Websites allow investors to buy shares of large Ohio Real Estate MLS projects. Minimums are low, but the upside potential is lower than owning properties directly. Crowdfunding opens real estate investing to more people.
Real estate investment trusts (REITs) allow investors to gain exposure to portfolios of real estate assets. REITs own and operate residential, commercial, and other properties, paying the most taxable income as dividends to shareholders. Investors benefit from stocks without physically owning properties.
Shared equity arrangements
Shared equity models include housing cooperatives, community land trusts, and down payment assistance programs. You purchase a portion of equity and share resale appreciation in exchange for lower buy-in costs and ongoing affordability. It helps expand access to real estate investing to more people.
With rental arbitrage, investors rent out properties at a monthly price higher than their costs to occupy them. Positive cash flow comes from the difference or “spread” between rental income and ownership expenses. Appreciation over time brings further gains. Expenses and vacancies present risk.
Lease options allow potential buyers to lease a home for a set period with the option to purchase later. A portion of rent builds equity towards the purchase. Buyers lock in a price upfront without financing. Investors earn attractive rents with possible future sale profits. Some strategies like turnkey rentals and crowdfunding real estate provide mostly passive income to investors who prefer hands-off options. Passive investors gain real estate exposure without day-to-day property management work or getting financing.