Investment

People everywhere are worried about their financial future. Savings are depleting, bank accounts are dwindling, and stress is increasing. In today’s uncertain times, smart money decisions are more important than ever.

That’s why real estate investment is critical. Smart real estate investing can help offset many of these worries. With the right real estate investment strategies, real estate investors can finally breathe easy and watch their wealth grow.

Economic uncertainty should not stop anyone from enjoying a positive cash flow.

At Peoples Capital Group, our team of real estate investment experts understands what it takes. As one of the leading real estate investment groups, we have the experience, the knowledge, and the wherewithal to help clients build a strong, sustainable passive income stream.

Whether a seasoned and diversified investor or someone who is about to begin investing, every investor can benefit from professional guidance. Top-tier real estate minds are ready to help. With the proper strategic investments and real estate assets, any investor can gain.

However, not all investments are the same. Whether it be consistent income for future investments or a quick chunk of cash, there are many different strategic realty investments.

Short-Term Real Estate Investing Strategies

There are various ways to make a profit quickly. These approaches or ‘schemes’ are not concerned with building an investment portfolio or maintaining rental properties over time.

Rather, short-term real estate investment is about a quick turnaround. Some investors simply don’t want to manage real estate assets for the long haul. They want a real estate investment that produces cash. They don’t want a cash flow, they just want cash. Period. Perhaps they want savings for future investing.

Perhaps, simply, they’re in a bind and want to make money fast. Even for investors with bad credit, it may be possible to make a small down payment and get started.

In today’s uncertain economy, this is completely understandable. There are various real estate investing strategies that accommodate such short-term investors. Short-term financing options are everywhere.

For those who aren’t interested in rental properties or long-term cash flow, the following options are perfect.

Fix-and-Flip Real Estate Investments

You may have seen signs along the road about ‘flipping’ homes. Essentially real estate flipping is a type of short-term real estate investment for investment properties that are discounted.

Sometimes, the investment properties may be perfectly livable, but the investor wants to make renovations, improvements, and additions.

A fixer-upper real estate investment essentially consists of two steps. Firstly, the investor purchases the house at below market price. After fixing it up, the investor sells or flips it for a profit. Depending upon the costs of renovation, the profits may be substantial.

With fix and flip real estate investing, understanding the particular market is critical.

An expert real estate agent can help investors find the right market with the property value appropriate to their needs.

Once real estate investors have settled on a fix and flip real estate investment, the next step is to have the property inspected. These costs may be minor or significant. Real estate investors can use a common property value comparison.

This comparative market analysis allows the investor to determine the likely value after renovations are made.  

Once the after-repair value (ARV) is determined, real estate investors can determine how to proceed. Typically, there are multiple strategies used for financing, fix and flip realty investments.

These different strategies change based on available cash, credit, and other equity resources.

Real estate investors choose all kinds of short-term financing. Some pay in cash while other real estate investors opt for more conventional methods of financing. Real estate investing may also benefit from equity loans or FHA 203k loans.

When purchasing and rehabbing realty, investors also use sources such as private and hard money lenders. Once an investor has obtained appropriate financing, it’s time to make the most of the market value.

An investor should capitalize on the investment by establishing a price that will attract buyers and ensure a healthy profit.

House flipping can be a great way to make quick money. However, a home inspection must be conducted thoroughly and honestly.

In some cases, additional problems may arise that were not detected. This can complicate house flipping and eat into potential profits.

For this reason, hasty house flipping can become significantly more high risk than it should be.

Fortunately, real estate investment professionals can help.

Wholesale Real Estate Investments

Real estate wholesaling is a strategy based on quickly and cleverly finding deals. For a real estate investor, this option is one of the quickest and most efficient when done correctly. Different from fixing and flipping, real estate wholesaling isn’t about purchase or ownership.

When an investor finds a promising property, the first step is to establish a contract. Under this real estate investment strategy, savvy investors are looking for the most bang for their buck.

Once the investor finalizes a contract with the seller, it’s time to find a buyer.

In real estate wholesaling, there are various reasons why a property may be easy to sell for a profit. Most investors who do wholesale find the property through foreclosures. In some cases, a property may be owned by the bank.

A top real estate agent can help navigate this subset of the real estate industry to make a deal that makes sense.

If the real estate investment property or property seller has ‘skeletons in the closet,’ experts can get to the bottom of it.

Essentially, real estate wholesaling is about marketing and negotiating cleverly. If an investor is skilled in crafting a profitable contract and persuading a potential buyer, wholesaling is a great option.

Some investors may even work on the behalf of more senior investors to search for and find attractive deals.

In any case, there is certainly quick money to be made in real estate wholesaling. With a sound understanding of the market value and property value, a dedicated investor can make it work. If problems occur, an expert real estate investment group can provide the professional guidance investors need.

Live-in-Flip Real Estate Investing

House for investment

This real estate investing strategy is similar to fixing and flipping, except for one main aspect. In live-in-flip scenarios, investors owning real estate move into the home. Investors make important renovations and then live in the property for at least 24 months.

Once this period has passed, the investor can resell for a profit. Investors who sell the live-in flip property may avoid taxes on the profit altogether. These tax benefits can be significant.

Individual investors pay no taxes on profits that do not exceed $250,000. Joint-filing couples pay no taxes on profits up to half a million dollars.

Nothing like beating the taxman at his own game!

Of course, as we all know, the tax system is extremely complex. A tax professional can guide investors through the loopholes and restrictions of investment tax benefits. Whether investing in general or real estate investing in a specific market, investors can gain tremendously from knowing these tax benefits.

Live-in-Rent Real Estate Investing

This investment strategy is the top choice for investors who want a primary residence before establishing a cash flow. Very similar to living in and flipping, this strategy allows an investor to relatively quickly build a modest investment portfolio.

Because investors in this strategy live in the property, the home becomes a central focus. This motivates investors to contribute more time to ensure the property is fully optimized.

As a result, there is greater property appreciation as the market value increases.

Once the living period has ended, the home can be a rental just like rental units. Rental properties like this can generate income that is lasting and robust.

Furthermore, investors don’t need to live anywhere near the rental property once tenants are secured. The rental income from this rental property can be a great way to jump-start an investing career. Investors can use these sources of cash flow for real estate investing in other profitable properties and for building sound real estate portfolios.

Buy-and-Hold Rental Property

This real estate investing strategy is used for rental units to generate income in roughly a year to several years. The goal is to increase rental income through appreciation. Essentially, investors using this strategy will buy a rental property, and then take steps to increase the rental income by renovating, increasing rent, and/or minimizing costs.

Buy-and-hold rental income is great when sourced from certain types of rental properties. Multi-family real estate investing is great for this strategy, as are short-term fixer-upper properties.

Rental properties located in affluent markets are also ideal, as they often undergo higher appreciation.

An investor using the buy-and-hold strategy should understand the specific market, especially if it’s a niche market. Market trends and local appreciation trends are of paramount importance. A typical down payment ranges from 20 to 25 percent.

If uncertain, an investor should seek professional real estate advice to capitalize on this strategy.

BRRRR Real Estate Investing

This acronym stands for Buy Remodel Rent Refinance and Repeat. This is a useful strategy for entrepreneurs to improve their investment portfolio through positive cash flow early in their investing careers.

Typically, investors using this strategy are interested in the best fixer-upper property they can find. They will purchase the investment property under value and then use short-term financing. Sometimes an investor can do so with little to no down payment.

Once bought and remodeled, the property is refinanced with long-term mortgage payments. These mortgage payments allow the initial capital to be extracted for subsequent deals. Ideally, with each property deal, the initial capital is mostly or fully extracted for the next one.

Again, this strategy is great for building fresh real estate portfolios. Once real estate portfolios become more substantial, different strategies are preferred.

As one’s investment career matures, property investments of lesser risk and leverage become ideal.

Top real estate investment groups can help determine the most appropriate risk tolerance.

House Hack Investing

A “house hack” is simply a situation in which the investor lives in a primary residence that is also used to generate income. This is becoming an increasingly attractive option, especially in today’s struggling economy. In some cases, a room or portion of the house becomes a rental unit.

The rental income for house hacking can come from a guest house, a den, bedrooms, or any other livable space. Other investors may live in a multiplex configuration such as a duplex or triplex. In these cases, the other ‘plex’ property is rented out.

A house hacking investment allows the investor to enjoy living at home while having the rental property very near. This is advantageous to those new to realty who are learning the industry and who have yet to build investment portfolios.

Typically, a house hack investment is not a long-term option. House hacking is more frequently used to offset house costs, build savings and start an investment portfolio. Those who decide to house hack can eventually leave the primary residence and convert the short-term rental property into a long-term rental property.

Before applying any of these strategies, an investor should fully understand the advantages and disadvantages of investing in short-term real estate.

Calculation ROI

Advantages of Short-Term Real Estate Investing

Rapid Real Estate ROI

The return on investment (ROI) is significantly quicker on short-term real estate investments than it is on long-term real estate investments. If you’re in a bind or simply want a quick turnaround, you may opt for short-term strategies. You don’t have to wait years (or decades) and you don’t have to focus heavily on appreciating values. You do, however, need to know what you’re doing. Not all fixer-uppers or flipped properties succeed.

No Need for Property Management Services

Short-term real estate investing does not require property management. Investors likely won’t have to pay property management companies or spend years stressing over rental properties and tenants. Many of the long-term issues that face other investors will be minimal for short-term investors.

Crash Course in Real Estate Investment

Short-term investments demand time, energy, and money in a small window of time. In that short span, an investor will learn to either sink or swim. It’s basically like a crash course in all things real estate industry. One can learn about local markets and niche markets. They can expand their knowledge of marketing and negotiation. They may also learn about the construction, building, and renovating processes.

The best part of this real estate crash course is perhaps the networking. A short-term investor will likely be exposed to all types of professionals, experts, and specialists in and around the industry. These may include legal minds, brokers, contractors, and of course real estate agents.

Disadvantages of Short-Term Real Estate Investing

Expenses for Holding 

As previously mentioned, some short-term investments do include rental units and rental income. However, if the investor is focused on a fix and flip unit, holding costs can become a problem. If the investment property takes a long time to sell, the investor could be stuck with the costs.

These expenses will likely include loans and maintenance-related payments, taken straight from the investor’s wallet. In any event, real estate agents and tax professionals may be able to assist.

Imminent High Risk

When there is a lot to gain in a short period, there is also a lot to lose in a short period. Short-term investment strategies can burn a hole in your wallet—and bank account—if an investor isn’t careful. Firstly, there is a capital gains tax. Secondly, there is the issue of the actual property condition.

Oftentimes when fixing and flipping, an investor may face unexpected expenses. There may be black mold throughout the property. There could be previously undetected structural damage. Unforeseen losses may occur that greatly undermine the property value.

This is why an investor should always enlist the services of reputable inspectors.

A top real estate investment group can ensure that all relevant parties are activated, and all appropriate procedures enacted.

Mental and Physical Stress

Again, short-term real estate is happening in a compressed time frame. The investor wants to make money quickly, but doing so may require a lot of effort. Things don’t always go as planned. First, the investor has to find an investment property that makes sense. This can take time and energy. There’s research, networking, negotiating, and more.

Then the investor may have to renovate the property. This can be a painstaking process and requires good contractors who are timely and trustworthy. After that, the investor has to find interested buyers. Mistakes along the way can make this process difficult.

Overall, short-term investments come with many disadvantages and advantages. How the process plays out depends on countless factors. Sometimes, it’s simply outside the control of the investor. Other times, the investor makes crucial errors along the way that cost him or her significant amounts in potential profit. If a lot of money can be made in the short term, then a lot of money can also be lost in the short term.

This is where top-tier real estate firms can step in to help.

Long-Term Real Estate Investing Strategies

Creating a strategy

In addition to the short-term investment strategies mentioned, there are many long-term strategies that an investor can use for continued cash flow. These strategies are best for more experienced real estate investors who are seeking a reliable, long-term source of income.

The benefits of long-term investments are very attractive. Due to appreciation and consistent cash flow, a long-term investor can enjoy substantial wealth accumulation. They also have opportunities to fully develop a diversified portfolio.

Long-term investing also offers a wide variety of property options. Investors may choose to rent out office buildings. They may opt for commercial real estate. They may opt for multi-family apartment buildings handled by property management services.

Long-term investing offers many potential income streams for an interested investor.

However, before investing long-term, one should take note: It is important to scrutinize potential markets for their passive income potential. The viability of a given market depends on many factors, including jobs growth, population growth, accessibility, crime, and other geographic and demographic factors.

Licensed real estate agents can guide long-term investors in choosing the best realty investment strategies for their goals.

Long-Term Buy and Hold Investments

This real estate investment strategy involves purchasing a property and then maintaining it over many years. Investors can choose to convert the property to a rental property or keep it vacant until purchased. In the case of multifamily complexes, the loss associated with potential vacancies can be offset by rental income from other units in those complexes.

The best long-term buy-and-hold properties are those expected to appreciate. As a long-term strategy, this approach can be financed in various ways. An investor can use traditional lenders, seek private loans, obtain financing from the seller, or apply for FHA government loans.

If an investor chooses to rent out these properties, they can either manage them directly or enlist property management services. Although the income may not be as fast as that in short-term investments, it is more durable and dependable.

Long-term income will typically include rental income, tax benefits against depreciation, appreciation gains, and loan amortization.

Cash Purchase Rental Investments

This strategy does not rely on numerous mortgage payments or down payments. All the money used in the purchase is cash. An investor simply saves up enough cash to purchase directly the property of interest. As a result, there is absolutely zero debt, which saves time and headaches down the road.

This strategy is most feasible for an investor with a diversified portfolio and established savings. Although more difficult to enact in pricier markets, this strategy can prove especially lucrative for capable investors. It creates income-producing properties that can be enjoyed for years on end.

The beauty of this strategy, of course, is the leverage factor. All-cash purchases make owning real estate far less stressful. An investor doesn’t have to lose sleep over multiple loans, mortgages, and other monetary issues. It’s a winning scenario. The lack of real estate debt allows the investor to focus on expanding into other real estate markets.

This investment strategy is ideal for seasoned investors who have the capital and the wherewithal.

Rental Debt Snowball Investing

This real estate investment strategy is perfect for minimizing risk, accumulating wealth, and building multiple income streams. In short, the rental debt snowball approach is great for gaining momentum in paying off real estate debt.

The strategy draws cash flow from various sources, such as rental incomes and other payments. The cash flow is then streamlined to pay off mortgage debts. As the debt is paid off, the rate ‘snowballs,’ and the debts decrease more rapidly.

As a result, investors can focus on other ventures, costs, and expenses as they improve their financial well-being. Those who have accumulated multiple income streams are best situated for this strategy. Once each real estate debt is reduced, the investor can quickly maximize profits.

Syndicated Real Estate Investment

The term syndication refers to the pooling of resources among fellow investors. This allows larger and more varied purchases of real estate. It also makes it easier to obtain various loans and financing. The best part of syndication is its versatility. With multiple people working together, it’s easier to tackle much bigger projects.

Through syndication, concerted investors can engage in any investment strategy. Syndicated deals remove many of the time and resource constraints inherent in solo deals.

Partners in syndications are commonly referred to as general partners. These partners can locate and handle deals on an investor’s behalf for a fee. This is why syndicated investments are typically called passive investments. A significant portion of the legwork is reduced for the individual investor.

The top general partners always do their due diligence. They will carefully screen and research potential investments, often rejecting certain opportunities that are deemed nonviable.

Crowdfunding Real Estate Investments

Nowadays, a lot of syndication is done through online platforms with so-called crowdfunding. This is a form of internet-based marketing that typically features sponsors, accredited investors, and minimum investment standards. Crowdfunding can often benefit from an array of research databases and programs.

Data centers may be used to closely analyze a massive range of variables. These could include fluctuations in markets, geographic and demographic details, and other critical factors. Statistical models and algorithms can make crowdfunding a very passive venture.

Together syndication and crowdfunding can make long-term investing significantly easier and more rewarding.

Publicly Traded REITs

REITs, or real estate investment trusts, can be compared to funds in the stock market. The main difference between a real estate investment trust and mutual funds is what the investor ends up owning. In the stock market, investors target stocks or bonds. In publicly-traded REITs, investors are getting a portion of income-producing properties.

Real estate investment trusts are especially attractive to commercial real estate investors. Once purchased, the ‘piece of the action’ becomes an entirely passive entity. For an investor looking to create a diversified portfolio, REITs are a potentially very rewarding option.

However, investors need to play it smart. They should do ample research to understand how these properties may perform (or under-perform). Just as the stock market can be volatile and unpredictable, changes in REITs may surprise inexperienced investors. A real estate investment trust is not always trustworthy.

In some cases, a comprehensive understanding of real estate assets may be required.

Overall, it’s important that an investor fully understand the advantages and disadvantages of these strategies when investing in long-term real estate.

Passive Income

Advantages of Long-Term Real Estate Investing

Reliable Passive Income

The beauty of sustainable long-term investments is that they continue to pay out, even when an investor isn’t working on them. Of course, there will be maintenance and occasionally issues with tenants and property, but these are all things that can be outsourced.

With appreciation, investors have an additional reason to invest in long-term properties. Short-term investments have difficulty offsetting transaction costs. Expenses such as title insurance, loan fees, commissions, and other costs can kill appreciation.

Long-term investments, however, can offset these expenses due to the duration of appreciation.

Substantial Tax benefits

Rental properties come with a number of expenses. Fortunately, these expenses are usually tax-deductible. Costs such as property taxes, maintenance costs, interest, and insurance fees can all be minimized through smart tax filing.

Equity

Long-term real estate is a good investment for various reasons, but a main reason is equity. Over time, an investor can steadily and reliably build equity. In uncertain financial times, it’s nice to have something dependable.

Inflation Hedging 

Many investments outside of real estate are impacted significantly by inflation. Fortunately, real estate is historically resistant to much of this pressure. Real estate appreciation often outpaces the rate of inflation. Real estate prices frequently jump during difficult economic times because these investments are seen as safe bets against inflation. Other investments may not be the case.

Disadvantages of Long-Term Real Estate Investing

Potential Vacancies

Vacancies typically occur for two reasons: the property is always vacant until sold or is vacant due to a lack of tenants. When a rental property is missing tenants, the investor has no cash flow from that property and may lose money in upkeep, fees, and other expenses.

Issues With Tenants

Some tenants are simply a nuisance. They don’t pay rent on time. They damage the property. They’re unruly or unreliable. Unfortunately, some people are just not good tenants and occasionally cause an investor more trouble than they’re worth. Occasionally, the only solution is an eviction or legal action.

Depreciation Difficulties

Depreciation happens for many reasons. Socioeconomic changes, volatility of markets, geopolitics, and natural disasters are all factors that impact the value of real estate. Although real estate tends to appreciate, an investor can never be too sure.

One can take actions such as renovating and tax sheltering to help fight these losses in value.

Whether long-term or short-term investing, there are plenty of options, mechanisms, and methods to make money. With the right moves and right guidance, an investor can succeed.

The Future of Real Estate Investments

The world is always changing. Life is more complicated and interconnected than ever before. With new technologies, tools, and platforms, the real estate industry is no different. As inflation continues to hit and struggles ensue, investors need to evolve too.

Don’t risk your financial future and allow your life’s earnings to go to waste. Make your money work for you.

Consult Peoples Capital Group and jump-start your passive income journey with historically profitable real estate investments today. It’s the one deal you can’t turn down.

Aaron Fragnito

Aaron Fragnito

Aaron has been helping people invest in Real Estate for over 10 years. He is a Co-Founder of Peoples Capital Group (PCG) a real estate investment and holding company. He is a full time real estate investor, as well as, the host of the New Jersey Real Estate Network and host of the Passive Cash Flow Podcast. Aaron has previously completed over 100 real estate transactions as a realtor and another 150 transactions in his current role as a real estate investor.

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