For those investors interested in real estate, there are a variety of investment strategies. Most involve either active participation or the payment of, sometimes exorbitant, fees to real estate management companies. One strategy, however, avoids these obstacles and provides a superior return without the hassles. Here are 7 real estate investment strategies with the best saved for last.
1. The Flip
The Fix and Flip is a classic real estate investment approach for rapid capital appreciation. Buy low and sell high. The last several years have demonstrated that this strategy isn’t foolproof; it can even bankrupt an investor. Timing is everything, and your success depends on buying the property at the “right” price.
2. Buy and Hold
This strategy is far more prudent and has built some of the greatest returns over the past century. Long term capital appreciation is definitely suitable for those at the beginning of their investment careers but may not yield suitable results for those close to or in their retirement years.
3. Buy and Develop from Scratch
New development is an investment strategy for those with deep pockets and plenty of patience. As timing is critical when developing new properties, an investor should be prepared to weather many storms before realizing a gain.
4. Cluster Accumulation
Similar to the previous entry, an investor buys up adjacent properties and sells them en masse to a larger developer. Again, patience and timing are everything in this strategy.
5. Buy and Develop an Income Stream - Part A
Redeveloping an existing property is far less risky than the developing from the ground up. Still, substantial effort is required to develop an increased income stream and then sell the property for a decent multiple of that number.
6. Buy and Develop an income Stream - Part B
An even longer term approach is for the investor to capture the income stream himself from a redeveloped property. This is a very prudent approach that yields excellent returns over the long run. The only downside is that the investor must be actively involved in the property.
7. Trust Deed Investing
For the real estate investor who treasures his own time as well as an excellent return, trust deed investing offers the best of both worlds. The investment is secured by a single, actual property and not a group of properties with other co-owners. All the conventional safeguards including the use of escrow accounts, title searches, appraisals and insurance are required before the loan is funded. The loan to value ratio is typically 60-70% of the appraised value so your borrower not only has a vested interest in the property, but has also been thoroughly scrutinized by the private money lender. Payments to you are made on a scheduled basis by a third party servicer and you are not required to actively manage the property.
Furthermore, trust deed loan terms are short, many of which mature in one to five years. This is ideal for those wishing to reap the benefits of high interest rates (8-11%) but don’t want to tie up their money for an extended period of time due to our ever changing economy. So if you’re looking for a real estate investment strategy that is both easy and effective, you need look no further than trust deed investing.