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There are several methods of investing in real estate with some being more complex and requiring a large investment, and others being much more simple and needing little to no money to get started. Real estate investing has a rep for being complicated so I wanted to break down the most popular ways to invest in real estate in 2020 and give you the pros and cons.
1 – Buy And Hold
This method is probably the most common. You buy a property and hold on to it, typically by renting it out. A few benefits to the buy and hold method is that your mortgage is being paid for and you are able to build your real estate portfolio. The key is to buy at a good price and to go into it with the mindset that this will be a longterm investment. Some downsides are that you are leaving money on the table because there are many other ways to invest that make you a lot more money.
2 – Fix & Flips
If you’ve watched the show on HGTV like Fixer Upper, Love It or List It, etc. you know exactly what this method is. Fix & Flip investors buy property that needs work at a discount. The investors then fix the property, update it to current living standards and then list it. The pros are that it’s a blast! I’ve made several videos of the properties I’ve fixed and flipped and it’s definitely a cool process and you learn a ton. The cons are that there’s a lot of risk and room for error if you don’t buy the property at the right price, underestimate repairs, or you overpay your contractors, etc.
3 – BRRRR
Perhaps the most loved real estate investing strategy is the BRRRR method. Buy, Rehab Rent, Refinance, Repeat. With this method, you buy a distressed property, fix it up to livable update conditions, rent it to a tenant, refinance the mortgage to take money OUT of the home, and then take that money and repeat the process on another property. The pros are that you build your portfolio and everyone seems to think this is the best strategy. Cons are that you risk being over-leveraged.
4 – Wholesaling
The infamous strategy that people don’t really quite understand. Wholesaling real estate involves finding a property that is distressed with an owner who is willing to sell it at a discount, and putting that property under contract. You then sell the contract aka the rights to buy the property to an end investor who typically fixes it up and is able to buy all cash. The difference between what the contract price is and what you sell the contract to the investor is your profit. There are several pros! It’s a great stepping stone to other investing strategies and it’s a great way to build capital.
5 – REITs
Real Estate Investment Trusts function similarly to stock. A REIT is basically a massive fund of money from investors that goes and invests in real estate and pays dividends to investors. They are very hands off and serve great as passive income. Although I have invested in apps like Fundrise, I personally think REITs are a bleak way to invest in real estate and much prefer the other methods!
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DISCLAIMER: Austin Zaback and guests of his videos are not financial advisors. All strategies, tips, suggestions, warnings, and recommendations included in the videos are from personal experience and are intended for educational purposes only. Austin Zaback and guests of his videos do not guarantee any particular results and, as with any investment, risk should still be considered. It is essential for viewers to perform their own due diligence and/or seek the counsel of a financial advisor.
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