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NVR, Inc. founder Dwight Schar benefits from decades of experience in the American real estate industry, having built his own Fortune 500 company. From buy-to-rent to real estate investment groups, this article will explore popular real estate investment strategies.
For those seeking out promising investment opportunities, real estate can be an extremely lucrative option. However, there are lots of different ways that investors can make money from property, and it is important to choose one that aligns with their desired timeframe, risk appetite, and financial goals. While property flipping and buy-to-rent rank among some of the most popular property investment strategies, there are many other options to explore.
In an age of Airbnb, investing in short-term vacation rental properties has become a popular strategy. Many investors focus on properties located in vacation hotspots and popular tourist destinations, renting them out to vacationers through platforms like Airbnb. Similar to the traditional buy-to-rent model, one of the chief incentives of vacation rentals lies in their potential to generate high rental prices. However, short-term rentals are vulnerable to seasonal fluctuations, with the potential for frequent void periods out of season.
For individuals with good do-it-yourself skills and time to manage tenants themselves, investing in a rental property can be an ideal choice. Although financing can typically be obtained for a relatively low down payment, the investor will need a significant contingency fund in order to cover vacant periods, non-paying tenants, and upfront maintenance expenses. One of the key benefits of buy-to-rent lies in the ability of rental properties to provide a steady income, enabling the property owner to leverage this collateral to expand their property portfolio over time – therefore generating multiple income streams and enabling them to offset unexpected losses with new income. However, with this type of real estate investment, unexpected costs can eat up income. This model is also vulnerable to unpredictable vacancies, as well as requiring landlords to devote time and resources to managing tenants.
Appropriate for individuals with experience of real estate valuation, renovation, and marketing, the goal of house flipping is typically to purchase, upgrade, and sell undervalued properties to achieve a healthy profit. However, some property flippers do not invest in improving properties, instead seeking out options they believe have the intrinsic value to achieve a profit without renovations or alterations. This type of real estate investment centers around tying up capital for a relatively short period of time, potentially offering significant returns. However, there are substantial risks involved. Flippers who are unable to achieve a quick sale may find themselves in financial difficulties if they have insufficient cash available to meet mortgage payments over a longer term, potentially leading to snowballing losses.
Online real estate platforms enable investors to club together, investing in a substantial commercial or residential deal. Also known as real estate crowdfunding, such platforms enable investors to join forces, allowing those with a modest amount of capital to become involved in the real estate market without committing a large stake.
One option for people with capital who wish to invest in rental real estate but avoid all the hassle of managing tenancies is investing in a real estate investment group (REIG). Essentially a pool of money from several investors and invested in rental properties, a REIG is similar to a mutual fund. A typical REIG investment would be buying or building an apartment block or collection of condos. A single investor can purchase one or several self-contained living spaces, with the company operating the investment group collectively managing all of the units, advertising vacancies, interviewing tenants, and handling maintenance. In return for conducting these management tasks, the company receives a percentage of rental payments.
