Real estate is generally a great investment option. Successful real estate investing can be a perfect way to achieve regular cash flow and long-term income. Getting into real estate also has tax advantages and helps you diversify your portfolio and leverage elsewhere.
House flipping isn’t the only way to get into real estate investing. I’m going to share with you five ways to get into real estate investing (or ways to pivot if that’s where you are in your investment journey). I will talk about: Buy and rent, fix and flip, live-in flip, wholesale, and BRRR.
Some of these strategies have more risk, and they all have distinct differences that will affect capital needed, timelines, passivity, and income. The best option for you will depend on factors like interest, access to capital, and individual goals.
Strategy #1: Buy and Rent
Investing in rental properties is an option for those who are looking for steady cash flow. The workflow associated with this type of investment varies depending on your goals.
You can take on the landlord role, involved in most things to a passive investor or full-time investor. Passive investors take a completely hands-off approach by hiring a property management team to help you find and vet tenants, keep up maintenance, and even evict tenants.
Landlords are working with tenants from paperwork to handiwork. And finally, a full-time rental property investor is using their time to find new properties, rent, and repeat.
Regardless of your choice, I recommend finding a property that is appealing to renters and matches or exceeds amenities and renovations in the surrounding area. Even though you’re not selling the property, it needs to have value and bring in high-paying tenants!
Strategy #2: Fix and Flip
This strategy is my favorite and my primary strategy for real estate investing. A fix and flip is when the investor buys, remodels, and sells a property. Of course, there’s a lot in between those three steps.
Here’s a basic breakdown to fix and flip real estate investing:
- Determine how you’ll fund your flip(s).
- Decide on a location and size of the project that aligns with your abilities and goals.
- Scope out properties for sale via the MLS if possible.
- See homes in person.
- Make offers.
- Add value to the purchased home by upgrading or renovating.
- Stage and photograph property.
- Sell for profit
Again, this is a more involved investment option, and a learning curve is associated, like most things. To learn more about the ins and outs of flipping, click here.
Strategy #3: Live in Flip
Next, we have the live-in flip. It’s just as it sounds: You are flipping a home while you live there. As you can imagine, this option has quite a few pros and cons.
Live-in flips allow the investor to pay zero capital gains on a property that earns upwards of $250,000 for single filers and $500,000 for a married couple filing jointly. This is because profits made from properties held for more than twelve months are typically in a more favorable capital gain bracket.
The general timeline for a live-in flip is as follows: Buy a house below market value or with the potential to increase value, move in, fix it up while you live there, and resell after the two-year waiting period.
Strategy #4: Wholesaling
Wholesaling is similar to fix and flips as they’re not passive income. Wholesaling is a good option for someone with zero or “bad” credit.
Real estate wholesaling can be defined as: When an individual (the wholesaler), acquires a contract from the seller of a property and assigns that same contract to an end buyer. The property is not purchased by the wholesaler. Instead, the owner’s temporary contract allows them the right to sell on their behalf and receives their revenue through an associated fee (usually a percentage of the overall property cost).
Wholesalers can make a steady income, but it is not a passive option. That’s because the wholesaler works with the seller and creates a contract, including the selling price and timeline. For example, the wholesaler may agree to sell a property for $250,000 in 2 months.
The wholesale option is a bit more complicated than we’ll get into today, as there are specific steps and contract inclusions. The important things to note for wholesaling is:
- Wholesaling is not a passive real estate investment option.
- Wholesaling requires a contract.
- Wholesaling can be profitable but is generally less profitable than other options.
- Wholesaling is a minimal risk.
- Wholesaling is a relatively quick option.
- Wholesaling does not require credit.
Strategy #5: BRRR
The final strategy I’ll touch on is BRRR. This means: Buy, rehab, rent, refinance, repeat. This option is very similar to the fix and flip but is flipping and renting. This strategy focuses on especially distressed properties.
Once BRRR is completed, it allows for passive income. A BRRR requires the following:
- Buying a property that’s not in good shape.
- Rehabbing the property to add value (due to the rough shape of the property, this will require significant renovations).
- Rent out the priority
- Convert equity into cash through cash-out refinancing
- Buy again and repeat.
There are pros and cons to the BRRR strategy. Some pros include adding to your rental portfolio and reaching passive income. Some cons include the high cost for extensive rehabbing and expensive or risky loans.
Getting Started in Real Estate Investing
The above five strategies are not the only ways to invest, but they’re the most common and great options for the new or seasoned investor. None of these strategies take away risk or the possibility of problems arising. Fully research your options and choose the best strategy for you and your business.
Ready to take that next step when it comes to flipping?
Here are some resources I’ve put together to help you get the information you need to move forward on creating your flipping life.
Make sure you have the Fixer Upper Checklist, so you know which areas are critical to added value in a home.
If you are interested in learning more about the House Flip Blueprint course, go here!
There are several videos on finding houses, renovations, and funding on YouTube. Check out your favorite flipping topics and new videos weekly.
