8 Proven Methods for Investing in Real Estate

Investing in real estate is one of the greatest wealth building activities one can engage in.  According to a Feb. 2020 report from the College Investor, over the last two centuries about 90% of the world's millionaires have been created by investing in real estate.  Unfortunately, many investors never utilize this profitable avenue because they have heard horror stories about tenants, toilets, and termites.  They think that real estate investing is all about getting late night calls for backed up toilets or dealing with unscrupulous tenants that don't pay rent.    Taking a closer look at real estate reveals that there are many different ways to participate ranging from extremely easy and passive to full time employment commitments.  Over the coming weeks, I will take a deeper dive into eight proven techniques and discuss the advantages vs. disadvantages of each.  The goal is to get you thinking about which technique makes the most sense for you based on your commitment, goals, risk tolerance, and personal situation.  The question should not be "should I invest in real estate?", but rather, "how should I invest in real estate?".

Here is an overview of eight popular and proven techniques.  Follow along in coming weeks as I dig deeper into each.

1. REITs, Mutual Funds, ETFs - Publicly traded funds that own real estate assets and distribute profits to share holders.  These are generally very liquid and are traded on stock markets.  
2. Real Estate Notes - Legally enforceable promises to repay a debt that are backed by a mortgage to collateralize the lender.  Notes are often traded at a discount and allow for long term passive income.
3. Private Lending - Acting as the lender to other investors that are purchasing properties.  The lender receives payments from the borrower providing passive cash flow and loans can be secured by an interest in the property.
4. Wholesaling - Getting a severely discounted property under contract and then immediately selling to an investor at a higher price (wholesaling) or on the retail market to an occupant owner (wholetailing).  The wholesaler profits from the difference between their contract purchase price and the sale price, usually without doing any rehab. 
5. Syndication - Method of pooling funds from multiple investors for the purpose of purchasing real estate.  Investor can either be passive (limited partner) or active (general partner).
6. Buy and Hold Rental Properties - This is the classic method of purchasing a property, renting it out, and holding on to it realizing monthly positive cash flow and long term equity buildup through amortization of the loan and market appreciation.
7.  Fix and Flip - Purchasing a property (usually at a discount), renovating it, and selling for a profit.
8. BRRRR - Buy - Rehab - Rent- Refinance - Repeat - Similar to a Fix and Flip but instead of selling the property, it is refinanced at the improved value which returns the invested capital to the investor so that they can repeat the process using the same capital.  The property is kept and rented for regular positive cash flow.

These are just a handful of techniques that investors are successfully using to profit from real estate.  Of course, there are many more variations and creative (and legal) ways to participate.   Which methods interest you the most?  Leave your comments here or reach out via the contact form at jbfoxcapital.com with any questions or to discuss further.

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