Investing in real estate can be a great way to diversify an investment portfolio. Real estate has a relatively low correlation with the stock market. Moreover, home prices are much less volatile than securities. As per Ali Ata, real estate investors are also able to benefit from the diverse tax breaks available for property investments, and ultimately improve their ROI. Building a portfolio of rental properties in geographically diverse regions helps investors to capably weather different kinds of economic storms.
Ali Ata sheds light on some of the most prominent real estate investment strategies
Much like there are many kinds of real estate assets, strategies available for real estate investment are also pretty dynamic. Which strategy shall be best suited for a certain investor would depend on multiple factors, like what level of cash flow they are seeking, risk tolerance, how much control they want to have over the asset, and so on. Whether one is a beginner or experienced real estate investor as well as how much cash they have for a down payment will also impact the investment strategy followed.
Some of the most widely used real estate investment strategies are:
- Fix-and-flip: This strategy involves identifying properties that need work, conducting the required repairs and renovations, and ultimately reselling them for a profit. Many real estate investors follow this strategy in their early years of the investment journey, to pay the bills and generate cash savings for future investments. While fixing and flipping is not always easy, having beautifully finished houses that can be sold at a good rate is surely rewarding.
- House hacking: Under this approach, an investor purchases a property and goes on to live in half of it and rent the other half out. The rental income received by them helps lower the monthly mortgage payments on the property. House hacking strategy works well with duplexes and other multiplexes as the investors are able to maintain a clear division between their space and that of the tenants. In certain cases, investors also choose to rent out a basement or bedroom from their single-family home (SFH).
- Wholesaling/driving for dollars: In the wholesaling strategy, investors focus on capitalizing on great deals. They basically find a property that will make a good deal, facilitate a sale between a buyer and seller, and ultimately collect the difference between the seller’s price and the amount paid by the buyer. An investor has to be well informed about the properties currently on the market to succeed in this strategy. They may make use of popular listing sites or even manually search neighborhoods for properties that look promising.
- BRRRR Investing: When carried out with care, BRRRR or Buy-Remodel-Rent-Refinance-Repeat strategy can be a good way to create a rental portfolio without running out of cash early in the investment journey. Under this, an investor looks for fixer-upper properties that can be purchased below their full value. After the property is fixed and stabilized, it can be refinanced with a long-term mortgage.
In the opinion of Ali Ata, the real estate investing strategy of a person must reflect personal long-term goals, available resources, and current circumstances. With time, people real estate investors must evolve their strategies to enjoy maximum gains.
