8 Ways to Invest In Real Estate
What do you envision when you think about buying a home? Likely you think of buying a house that you will live in, where you pay a monthly mortgage for 30 years.
But do you know there is more than one way to buy real estate? You don't have to do what your parents did when buying a home. You can get creative to find ways to acquire multiple properties or get part (or all) of your mortgage covered.
There are 8 different creative strategies that you can use to start real estate investing as a beginner.
1. House hacking: Turn Your Home into a Money Maker
Did you know you can put your primary residence work for you? Welcome to house hacking: renting out part of your home to generate income to offset your mortgage and other costs. That spare bedroom or dusty basement can earn you serious cash. It's like your property's paying its own mortgage. Consider getting a roommate and renting out a room for the long term or renting out the space as a short-term rental on Airbnb.
2. Turning Your Primary Residence into a Rental
After you've lived in your house for at least a year, move out and turn it into a rental property, allowing your renters to cover the cost of your potentially generating additional cash flow—while continuing to gain equity in this property .ash flow and continue to gain equity in your property. It's a win-win!
Once you rent it, you could move to a new city, travel, or buy another house in the same city as the original property. Many investors rent out their primary and buy a new primary instead of purchasing an investment property or vacation home. Why? Because there's less money down needed when you buy a primary residence. So it's more cost-effective to move into a new primary residence.
3. Build an Accessory Dwelling Unit (ADU)
Have you heard of ADUs? They're Accessory Dwelling Units, also known as independent residential structures, located on the same lot as a single-family home. Think granny flat or in-law suite.
Building an ADU can seriously boost your property value; renting it out is another way to earn income. This type of property can work for both long-term and short-term rentals.
We've had several women in the Factora community go this route; you can listen to their podcast episode here or here.
4. Split your Property
Consider dividing an existing property record into a separate property record. It may require adding a kitchen, bathroom, etc. But if you own a big lot, this could be a consideration! You could sell the separate property. Or better yet, build a new house on the split-off lot and sell or rent it. It's like a BOGO deal on your property!
5. Consider a real estate partnership
Don't wanna go in alone on a property? Or need some extra funds to buy the property you want? Consider partnering up with someone or multiple people! A partnership is when you purchase real estate with another individual, group, or corporation. Find a like-minded investor and pool your resources. You'll share the costs, the risks, and – the best part – the profits.
When considering a partnership, you must think about what you bring to the table. A solid partnership has 3 things:
Time:
You have time to search for properties, manage the property or renovations, or prepare mortgage documents.
Talent:
You know how to evaluate deals, can do DIY renovations, or you're a real estate agent, lawyer, contractor, or another professional who could help buy a property.
Money:
You have the cash to help buy the property to cover the down payment or renovations; you have a W-2 job to prove mortgage worthiness and reliable purchasing power.
Consider what you can bring to a partnership, then look for partners who complement what you bring.
6. Consider a Cash-Out Refinance
Do you have a property that's appreciated in value? You could consider a cash-out refinance. Doing this replaces your existing mortgage with a new one for more than you owe to get access to the equity AKA, the cash from your property.
Some ideas for how to use this money are:
Buying another property
Renovating a current property
Consolidating debt
Start a business
7. Flipping houses
Yes, just like you've seen on HGTV. This approach involves buying undervalued properties, renovating them, and selling them for a profit. This strategy can be a gamble (and a lot of work!) but can really pay off. Plus, who doesn't love a good before-and-after?
8. BRRRR
The final method is called BRRRR, which stands for Buy, Rehab, Rent, Refinance, Repeat. It's a method for growing your real estate portfolio, one property at a time. This is used by investors to build passive income and combines some of the above techniques we mentioned. Here's what the steps look like:
You buy a property
Fix it up!
Find renters (can be short- or long-term tenants)
Once rented, refinance the property and pull that cash out
Use that money to buy the next property!!
Ready to be a Real Estate Investor?
What path do you think you'll use to purchase your next property?
Evaluate all your options, and remember to get creative! You don't have to live in one home and pay it off for 30 years; there are so many ways to get into real estate and acquire houses—on your own or with friends!