Article by Rachel Maisen
If you’re considering investing in the real estate market, you’re in luck. This post considers the most effective real estate investment strategies in 2023. First, a quick introduction.
Under the right condition, the real estate market can be an excellent alternative to other investment options such as stock. Besides offering lower risk, real estate investment yields better returns and provides better diversification.
With that said, real estate investment is only lucrative to investors that have an in-depth understanding of the market. In other words, you should be able to identify the strategies that’ll help maximize your profit.
That’s where this post comes in.
In this article, we’ll explore the strategies that successful real estate investors use and how they work. Some of these include house flipping, real estate wholesaling, and Real Estate Investment Trusts (REITs).
Let’s jump right in.
Ten Most Effective Real Estate Investment Strategies in 2023
Here’s a list of the ten most effective real estate investment strategies today.
1. Buy and Hold Strategy
The buy and hold strategy begins with buying a rental property and finding tenants to rent it.
Admittedly, investors often use the buy-and-hold strategy in a residential real estate context. However, it can also be handy in commercial real estate.
That means you can purchase rental properties exclusively for business-related purposes.
The primary benefit of this real estate investment strategy is its potential for regular cash flow. With this strategy, you can receive regular monthly rent payments and enjoy a long-term benefit from property appreciation at the same time. But there’s a downside.
Buy and hold is an active investment strategy. Not only do you have to become a landlord, but you also have to take on the work it entails.
2. Short Term Rentals
Short-term rentals — also known as vacation rentals — involve furnishing a piece of property and renting it out to guests for a short period. For example, property owners or managers can rent out their apartments every other week or night.
Short-term rentals have become popular now more than ever, and it’s not surprising. Besides its high earning potential, this investment method also offers a high degree of flexibility. In other words, every decision is up to the owner.
Despite these advantages, investing in short-term rentals comes with specific downsides. These include minimal control of rentals and unpredictable cash flow. As a result, this investment method might not be for everyone.
3. House Flipping
House flipping may be the most common real estate investment today. Indeed, it’s not uncommon to find several workshops, seminars, and webinars that explore this lucrative venture. But what exactly does it mean?
Well, house-flipping — as the name implies — involves making a profit from a home purchase after sprucing it up. So, we break the process down into three fundamental steps:
- Purchasing an undervalued residential property
- Fixing the property up
- Selling the property for profit
Speaking of profit, house flipping is super lucrative. According to Statista, the average gross profit made per home flip in the U.S. was about $67,000 U.S. in the second quarter of 2021.
Of course, you could also lose a lot of money on a flip. That’s because you risk over-improving a specific property and not get your investment out of the home. This is especially true for first-time real estate investors.
4. Real Estate Wholesaling
Real estate wholesaling involves an individual — known as the wholesaler — acquiring a contract from a property seller and assigning that same contract to an end buyer.
Most property investment experts agree that wholesaling is one of the best short-term investments. Indeed, it’s an excellent way to break into the real estate investment industry.
That’s because wholesaling requires very little capital to get started. All you need is impeccable negotiation skills and an eye for undervalued properties.
5. Real Estate Investment Trusts
A real estate investment trust (REIT) is a publicly-traded company that owns, operates, or finances income-generating real estate. So, individuals and investors can buy shares of these companies in exchange for dividends.
Simply put, you won’t have to buy, manage, or finance any property by yourself. With that, you can enjoy the dividend of real estate investment without owning a property.
With that said, REIT investment doesn’t meet the IRS definition for “qualified dividends.” As a result, dividends from this real estate investment strategy are often taxed higher than stocks.
6. Real Estate Crowdfunding
The process of crowdfunding begins with a real estate developer identifying an investment opportunity. Since the individual lacks the capital to execute the project, they use a digital platform to raise capital from other investors.
With crowdfunding, individuals can quickly generate passive income from real estate investing. You don’t even need to be a property investment expert to participate in crowdfunding.
Be that as it may, it’s best to vet every investment opportunity before diving in.
7. Property Tax Lien Investing
Property tax lien investing is another way to make a profit from real estate. Here’s how it works.
An investor covers the cost of outstanding taxes — including interests and other fees — out on a tax lien. That way, they can earn the principal and interest from the state when the property owner eventually pays their property tax.
There are two ways to invest in property tax liens. If you’re an expert, you could buy the property by yourself at an auction. However, the easier option would be to invest in a special property tax investment that an investment company manages.
As in other real estate investment strategies on this list, it’s best to do your homework before diving in.
8. Live-in Flipping
This real estate investment strategy combines some aspects of regular house flipping and rehabbing. It essentially involves living in a real estate property while renovating at the same time.
So, why is live-in flip an effective real estate investment strategy?
Well, it provides a chance to pay zero capital gains taxes on a property that earns upwards of $250,000 for single filers. What’s more, a married couple can make twice as much if they’re filing jointly.
Besides boosting savings, live-in flipping allows you can make changes to attract high-quality tenants.
9. Long Term Leasing
As a rental property owner, you control the limit of your tenant’s lease. While most landlords opt for short-term rentals, long-term leases could be a smarter choice.
That’s because it offers more cash flow consistency compared with short-term rentals. So, property owners are more likely to get steady rent for a longer period on long-term leases.
Then there’s also less administrative hassle. You only have to find and screen the right tenants once every five to ten years. Unlike short-term leases that require regular vetting of renters.
10. Real Estate Investment Groups
Real estate Investment Groups (REIG) describe a business that dedicates its effort and capital to real estate. These include buying, renovating, selling, and financing properties.
Like REITs, REIG often involves investors pooling their funds on property investment.
However, REIG is not a taxable corporation with a board of directors, strict rules, and criteria. Besides, you would own a stake in physical property — unlike a REIT that gives you access to dividends.
Additional Real Estate Investing Information and Tips
For busy professionals, there are a number of passive real estate investment strategies that are ideal for developing financial independence. Check out our article: Passive Real Estate Investing Secrets and Strategies for 2023.
The whole point in investing in real estate is to accumulate wealth. A good article that focuses on the strategies specially designed for wealth accumulation, see our article Finding the Real Estate Investment that Will Accumulate Wealth.
Confused or Uncertain About Where to Begin?
With so many strategies to choose from, confusion as to where to begin leads to inaction. Schedule with Dr. Allen, a FREE – NO OBLIGATION – NO STRINGS ATTACHED call. Or email Dr. Allen with your questions and thoughts at allen@SteedTalker.com. I’ll help you sort it all out, and you’ll soon be on your way to prosperous investing to live more abundantly in all areas of life.
About the Author
Rachel Maisen is a freelance author and the Outreach Executive with We Buy California Houses for Cash.
A good writer is known for his or her work so is Rachel. Rachel is an author, known for her amazing articles regarding Real Estate World. She outreaches information on Real Estate Investment, methods, business and many more. She wrote many articles for a better understanding of beginners as well as investors. Her main focus is to provide information to the readers about Real Estate Investment in the simplest way even a beginner can understand very well. By reading her articles one can understand how to invest, where to invest and when to invest in Real Estate.