Real Estate Investment Strategies: An Easy Way to Understand Different Ways of Investing

Real Estate Investment Strategies: An Easy Way to Understand Different Ways of Investing 

I have found such a passion for real estate investing, and if you are reading this, I am sure that you have an interest in it as well! There are a number of different ways that you can start investing in real estate and many different strategies or types of investments that work for your personal end goal.
In this blog post, I am sharing what financing and investment strategies that I personally do.
I hope you enjoy reading more about some of the basics of real estate investing!

​Different Ways That I Finance A Deal:

​Traditional Mortgage: ​I was able to qualify for a traditional mortgage when I was still working full time (side note- I used my day job to fund my side hustle).  I then had to hold these properties for a minimum of 4 months.  I was able to purchase 3 flips along with my first rental with this type of financing. If you are not able to qualify for a traditional mortgage, the next examples for financing might be for you.  

Private Money: This is one of my favorite ways to finance. I can have little to no money in the deal and bring in family or friends who know my track record and will let me use their money to invest. I then pay them back with interest when the deal sells, if I choose to refinance. With private money, you are able to negotiate your own terms with these lenders, they are usually significantly lower than hard money loans. I have purchased 4 flips and my second rental property with this type of financing. 

Hard Money: Hard money can scare some people because it can be expensive and you usually have to pay the loan back, in full, in under a year (my lender requires the loan to be paid back in 8 months). Your personal rate will largely depend on your experience and credit score. You will have to pay 1-2 "points" upfront (this is 1-2% of the amount borrowed) and then your interest rate can range from 8-18%. I have learned that, yes, although this is an expensive way to get money, it is cheaper than a 50/50 split partnership. I have purchased 2 flips and my third rental with this strategy.

Cash: Although this can take a while to build up, if you are consistently turning your profits into another flip and continuing this process, you will eventually build up enough cash to finance your own deals. Bringing cash to a deal allows you to have a quicker close, avoid lending fees, and investor terms. Whenever possible, I try to fund the rehab with cash.

Partners or Other Investors: Maybe you have the time and knowhow to run the job-site, manage the budgets, do the design and find the deals. There are investors who have money to invest, however they do not have the time to look for the deals and then execute the remodels. This would make for a great partnership. A partnership can look different for every deal depending on what each partner is bringing to the table. This usually results in a profit split. 

When I started investing, the only strategy that I knew was traditional funding. Learning and using different ways to finance deals allow you to have multiple projects at once or possibly larger projects that you would not be able to fund on your own. The type of funding that I structure my deals with now largely depends on how much of my own money I want to use, how risky the deal is, and how many properties I am currently working on at that moment.

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​Different Types of Investments Strategies:

Fix & Flip: I use and love is the "Fix & Flip" model. This is how I was able to quit my day job, start my business, and have money to re-invest and continue the process. I enjoy the process of flipping, however this is time consuming and usually more involved. 

Buy & Hold: Rentals give you monthly cash-flow, allowing you to have some of the best tax benefits along with the added appreciation of the property over time. This can be a long term rental, a short term rental or even a vacation rental. There are turn-key properties that you can purchase that have already been renovated, however you are usually paying a premium for this. If you enjoy the remodeling process, you can purchase a home, rehab (or renovated) rent and the refinance! More detail on that on the next strategy. 
I currently have 3 rental properties in 3 different cities and used a different financing strategy to acquire each property - traditional mortgage, private money, and hard-money. 

BRRRRR: One of my favorite strategies is called the BRRRR strategy! I just completed this on my second rental. When you understand this process, you can see how you would be able to grow your portfolio quickly while still maintaining ownership of your property. 
B - buy
R - rehab
R - rent 
R - refinance (this is where you pull 75-80% out of the house after you finished the renovation. Ideally you will end up pulling all of the money that you invested into the deal out at this step, after you have created value with your rehab.
R - repeat! Take the money and repeat the process with your next rental! 

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​The 3 Biggest Excuses That People Do Not Start Investing In Real Estate Are:

I don't have the money, I don't have the time, and I don't know how. 
I am proof that this CAN be done!

Excuse 1: I don't have time. I flipped 2 houses, purchased and renovated a rental and started on my 3rd flip all while working 40+hours a week at a full time retail job. If you want something bad enough, you will find ways to make the time. 

Excuse 2: I don't have money. I do suggest saving enough money for a down payment before you dive right in. I saved for many years before I was able to have enough for my down payment. With that being said, I now know that there are many different ways for you to get money if you do not have the money yourself to start (Private money and hard money are great examples of this.) There are also investors who might be willing to partner with you. They bring the money to the deal where you bring your time and expertise. 

Excuse 3: I don't know how. I didn't either! I knew nothing about real estate or flipping houses when I started. I went to the job site as much as I could and asked questions... a lot of questions! On my third flip, I hired all subcontractors to teach me how to do everything they were doing. I was still working full time so I would work at my job site before and after my full time job. I learned how to demo walls, demo tile, remove carpet and cabinets. I painted all of the baseboards throughout the house, installed all the light fixtures, learned how to wire can lights, and how to switch out receptacles just to name a few. Having this knowledge was so beneficial to my future projects.  We all start out not knowing how to do something knew, but you learn and grown throughout the process. One of the best ways that I learned was by doing the work, trying out new designs and by trial and error. 

​I hope you've enjoyed reading this and took away some valuable information that will help you start or continue your real estate investing journey. 

​"Don't be afraid of trying something new, because life gets boring when you stay within the limits of what you already know" 
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Leave a comment on the most helpful tip that you took away!