You may have watched flipping shows on HGTV and wondered about that real estate investment strategy. Or, you may know people who own a single family rental property. Or even still, you may have come across someone who has done house hacking….
Sure, those are all real estate investing strategies. But they are by no means everything. Real estate investing is such a broad category. It’s like saying you’ve only listened to pop music when there’s a vast world of genres out there.
I’ve been investing for years—moving from single family rentals into investing in apartment buildings and now into hotels and syndicating deals. I’m always amazed at the creative real estate investments other investors come up with. This is such a fascinating industry with so many possibilities.
I’ll cover all the real estate investing strategies I’m aware of here and promise to keep it updated as I learn more. Let’s get into the details!
What are real estate investing strategies?
This is just a way of saying “which real estate investing niche” are you in. Each area of real estate investing has its own path and learning curve to generate income. Oh and trust me… there IS a learning curve. Don’t be misled by the so-called guru real estate investors telling you how easy things are. There’s work involved here but I will tell you it is 💯 worth it. If you look at the overall real estate market, Grandview Research predicts a 5.2% CAGR through 2030. Not all real estate investing strategies will get there so you’ll want to pick the right space.
Commercial Real Estate
Commercial real estate investing refers to property used for business-related purposes or to provide a workspace rather than as a living space. Typically, living space in real estate refers to residential properties like single family homes or condos. The exception is larger rental properties that have more than 4 units. Anything over this number is commercial realas estate.
As I just mentioned, any residential real estate property that has more than 4 units is a commercial property. This category includes apartment buildings or multifamily housing. These are real estate investments that generate rental income from tenant monthly rent. This is one of the most popular real estate investor strategies for those looking to get into commercial real estate.
This is the space I’m in now. Hotels are a very unique real estate investment type because they have the real estate component but also a very active operational business. To get into this commercial real estate investment strategies that requires you to find a strong partner or mentor. I say this because we are only in hotels because we got connected with an experienced operator and formed a real estate partnership with a JV agreement.
Self-storage has been on a roll for the past few years. It’s a real estate investment space that thrives on change like people moving or downsizing. In fact, one in five households use self-storage today and continues to have positive momentum coming in to 2024. According to Data Bridge Market Research, this real estate investing niche will have a CAGR of 8.2% through 2029.
Commercial real estate office investing has taken a beating ever since the pandemic. As companies shifted to remote work, offices across the country sat empty. And despite a push by some employers to bring staff back into the office, these buildings are not as full as they once were. The lack of demand for office space impacts the ability to earn rental income and benefit from appreciation. Bottom line… this is a tough space right now as illustrated by this graphic from the White House on vacancies by market.
This real estate investing strategy involves owning the buildings that house dentists, optometrists, primary care physicians and even veterinarians. These buildings are for medical use and many have expensive equipment that is very difficult to move. These income producing properties tend to be stable in all types of economic cycles.
If you want rental income without having to deal with tenants ore maintenance, triple net (NNN) is an excellent real estate investing strategy. Here’s how it works — you buy a physical property that houses a major business tenant like a nationwide drugstore chain. The tenant leases the space from you and pays you monthly rental income. But here’s the kicker…. the tenant also handles all the maintenance and repairs. It’s a very interesting real estate investing strategy but you do need to understand this space. Like most of the strategies here, it’s best to work with a real estate agent who knows the industry and market to help guide you.
Industrial real estate investing involves buying properties used for industrial activities, like warehouses, factories, and distribution centers. Think of it as getting into the behind-the-scenes spaces where stuff gets made, stored, or shipped out. You’re basically betting on places where businesses do the heavy lifting, whether that’s assembling products, keeping inventory, or shipping goods.
This is a capital-intensive niche within real estate investing. I see this predominately as a space where you invest as part of real estate investing groups, mutual funds or individual stock in a company that focuses on this real estate industry.
With the growth of online shopping and e-commerce businesses, who would have thought that owning real estate in retail would be a good idea? This sector has been surprisely successful in the past few years. The best areas are “essential retail” which means that you own and manage properties that house grocery or drugstore tenants. Another trend is “medtail” which refers to healthcare in a retail environment. Examples are emergency clinics or large national dental chains like Aspen Dental.
The assisted living real estate investment strategy is worth considering as we experience a growth in our aging population. In 2024, more people will turn 65 than ever in history. And this is only the beginning. See the graph below from Five Thirty Eight which depicts Census Bureau data and predictions on the growth of our aging population. You can invest in large assisted living projects through real estate investment groups, trusts and individual companies. Or you can pursue a path of turning a single family home into residential assisted living or RAL real estate for short.
Residential Real Estate
Single family homes, condos, townhouses, 4-plexes — these are core real estate investing strategies that are where many investors start. I personally love single family homes because these are great income producing real estate assets that you can leverage in so many different ways.
You probably think of house flipping from HGTV and the amazing makeovers the fix and flip experts use to sell properties at huge profits. In real life, I funded a flipper who found a distressed property from a wholesaler, made a few minor upgrades, sold it for a small profit and then split the returns with me. The house wasn’t glamorous and there’s no way it would make an HGTV episode but…. it did make money.
One strategy you might not be aware of is the live in flip. This is where you buy a property and live in it while you renovate and then sell for a profit. You make money here on the capital appreciation and selling price versus what you paid and invested. There are rules that can help you reduce capital gains including:
You must sell the home within 5 years of purchase
You must live in the home for a minimum of 2 years
Real Estate Wholesaling
Real estate wholesaling is a strategy that you can use to invest in real estate with no money. There’s several approaches here but the gist is that you generate leads for motivated sellers, get a property under contract and sell the contract to another investor for a fee.
Wholesalers provide an incredibly valuable service because real estate investors who are busy with renovations or managing properties do not have time to also generate leads and find motivated sellers. Getting undervalued properties provides experienced investors the chance to make higher profits.
Curious how real estate investors in this space find properties? Here’s a few ways:
Direct Mail: Sending letters or postcards to homeowners in targeted areas.
Driving for Dollars: Driving around looking for distressed properties.
Bandit Signs: Placing ‘We Buy Houses’ signs in strategic locations.
Networking: Connecting with real estate agents, attorneys, and other wholesalers.
Public Records: Searching for pre-foreclosures, divorces, and estate sales.
Auctions: Attend foreclosure or tax lien auctions. You can check out houses on sites like Auction.com.
As a beginner real estate investor, house hacking one of the best ways to start. The way it works is you find a way to rent out a portion of the property you live in and use the rental income to pay the mortgage. Some ways I have heard of investors using this approach include:
Renting out a room in your apartment, house or condo. You can rent out the room as a long-term or short-term rental.
Buying a house with a separate unit like a duplex or a guesthouse.
Adding an accessory dwelling unit (ADU).
ADUs are growing in popularity as a way to address increasing housing costs and cities are leaning into this strategy. As an example, the City of Phoenix just passed new rules in September 2023 to allow an ADU in all single-family properties as long as they meet space and other requirements.
This is the tried and true real estate investing strategy. You buy a single-family home, add a tenant and then get rental income each month to cover the your costs like the mortgage payments and repairs. As for the rental type, you can use the property in so many ways like:
Long-term rental with a tenant who signs a one-year lease.
Offer your property as a fully furnished mid-term rental for folks like traveling nurses.
Short-term rental listed on Airbnb or VRBO.
Rent your house to corporate housing.
Residential assisted living – RAL real estate.
Rental arbitrage – generating rental income without owning property.
Long Term Rentals
You buy a house, find a tenant, sign a lease and collect rental income. Sounds easy- right? Well…. not exactly. You need to know how to find and screen tenants, how to manage maintenance, what to do if a tenant doesn’t pay rent. The best scenario is finding a stable tenant that rents your property for years. You benefit from:
Rental income that gives you a profit after covering your mortgage payments, property taxes, maintenance and other costs.
Increase in real estate property values and capital appreciation when you sell.
Tax benefits through passive income deductions. Be sure to work with your CPA to follow Internal Revenue Service (IRS) rules around taxable income.
But… if it’s too much work or begins to be a hassle, you can hire a property manager to help run the day to day operations.
If you aren’t sure where to start, check out my video on how to buy your first rental property:
Mid Term Rentals
If you like the idea of a stable tenant but want a higher rental income than you can get with a long-term rental the mid-term real estate investment strategy might be for you. For this real estate investing approach, you need a fully-furnished property that can appeal to someone who needs temporary housing for a few months. You can find potential tenants on mid-term rental listing sits like Airbnb, Furnished Finder, AnyPlace or HousingAnywhere.
Short Term Rentals
This rental property strategy became very popular during the pandemic. People still wanted to travel but they preferred to stay in isolated real estate properties versus larger hotel type environments. Just like long-term rentals, in the short term space you can manage on your own or you can hire a property management company.
The growth of short-term rentals and impact on housing supply means that many municipalities are passing laws that impact how these properties operate. Be aware of the changing landscape in your local real estate market. Below is an example of recent ordinances passed by the City of Scottsdale, Arizona.
Similar to mid-term rentals, corporate housing is a real estate investing strategy that involves fully furnished properties that you rent on 30 day+ leases. The difference is you can establish leases and contracts directly with corporate employers. You can reach out directly to employers to find opportunities in your local real estate market. Or, you can list your rental property using online real estate platforms specific to corporate housing like:
National Corporate Housing
Residential Assisted Living
With the growing aging population in the US, this will likely be a hot area for many years to come. Here’s a quick summary of how this real estate investment strategy works:
You buy a single-family house that has as many rooms as you can afford.
Make improvements to the house tailored for elderly tenants.
Find a company that provides assisted living services and lease your property to that company.
While the graph below shows Grandview Research’s prediction of 5.5% CAGR for assisted living in commercial real estate, it still gives you an idea of the growth in this industry.
Investing Without Owning Real Estate
You can also generate rental income without actually owning property. This investment strategy is called “rental arbitrage” and it involves collaborating with your landlord. The way it works is:
You sign a one-year lease for a property at x rate.
Decorate and furnish the property.
List the property on a short-term or mid-term listing site.
Charge a higher rate than your lease.
Manage the rental process for the tenant who is leasing from you.
Land investing is an investment strategy I’ve always been interested in. It’s a popular investment strategy for beginners because you can get started with very little money. And even better, you don’t have to manage tenants or a property. There’s a few strategies in land investing:
Buy and Hold: You can purchase land and hold onto it long-term, anticipating value appreciation over time.
Land Flipping: You buy land at a low price and sell it quickly for a profit without making any improvements. You can get started here with flipping courses like LandProfit Generator show you how to sell this real estate asset with seller financing.
Develop the Land: You can develop the land yourself, adding infrastructure or buildings to increase its value.
Lease for Use: You can lease the land to farmers, businesses, or for billboard advertising, generating regular income.
Sell to Developers: You can buy land in the path of growth and sell it to developers when the area starts to expand.
Subdivide: You can buy a larger parcel of land, divide it into smaller lots, and sell them individually for a profit.
Timber Investment: If the land has timber, you can manage the timber resources and sell the wood for income.
Passive Real Estate Investing
If you don’t want to be an active real estate investor, there are many ways you can passively invest in real estate. I personally like to do both. For example, there are places in commercial real estate investing where I want to invest but I don’t have experience or the time to learn. In such cases, I’ve invested in real estate syndications. There’s a whole range of ways you can invest in rental properties without having to do the day-to-day work.
Real estate investment group
A real estate investment group (REIG) is a way for members of the groups to pool their funds and invest in larger properties and projects. My favorite example is SparkRental’s co-invest club. This club is a group of investors that meet monthly to discuss syndication opportunities. Then, the club decides where to invest and the members have the opportunity to invest with as little as $5k. Members also get a chance to learn through the whole process as they can see what goes in to vetting and due diligence as part of a broader investment strategy.
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Real Estate Syndications
Real estate syndications are partnerships where investors pool their capital to buy and manage a property, sharing profits and losses according to their investment. Syndications involve a General Partner (GP) or Sponsor, who finds the opportunity and manages the investment. The other members of the syndication are the Limited Partners (LP) who passively invest.
This is a commercial real estate investing play and syndications exist for all types of properties like multifamily, medical office buildings, retail and industrial.
Real estate investment trusts
A real estate investment trust is a publicly traded entity that invests in specific real estate properties. REITs specialize in a specific area of real estate like self-storage or retail.
While both are passive investments, REITs are very different from syndications. In a syndication, the passive investor typically has a relationship with the sponsor. And, the passive investor makes a decision on the project by looking at the Offering Memorandum (OM) and deciding whether or not to invest in that project. With real estate investment trusts, you don’t get a say in which rental properties the REIT invests in.
There are a number of online real estate platforms that connect investors with syndications and other real estate investment opportunities. The platform is simply a way to connect both parties. If you decide to use a crowdfunding platform to invest in real estate, you’ll still want to do your own due diligence on the investment opportunity.
Each site has its own rules around minimum investment amounts and qualifications to invest. Requirements can include being an accredited investor or other specific aspects around your financial situation.
Private investors are people who invest in real estate projects without having to run the day to day operations. This is a broad category so let me break down a few ways it can work:
If you invest in a syndication, you are a private investor.
You can lend money to a friend or relative to invest in real estate.
You can set up a structured company where you lend to active investors on a regular basis.
There can be rules and regulations in this space so be sure to investigate and follow these laws.
Our first hotel is a joint venture partnership with someone who had 20+ years of hotel real estate investing experience. We brought the capital and he brought the expertise. It’s a win/win partnership because real estate debt lenders require a level of expertise before they lend you money to buy rental properties. You can basically “get” this expertise by bringing on a partner.
You’ll see newer multifamily syndicators do this by forming partnerships with their property management company. You can think of it a bit like a co-signer on a loan…. it’s risk mitigation strategy by the lender.
Private funds are a big real estate investing category. It could include debt funds, note funds, single-family funds… the list goes on. Experienced investors operate a private fund in that particular real estate investing segment. They raise capital to buy the specific asset and then you receive a return on your investment.
As an example, I’ve invested in note funds through PPR in the past and received a steady passive return. I have never invested directly in notes and honestly, I don’t have the desire to learn. But, I wanted to diversify my portfolio and so I leveraged this passive real estate investment strategy to invest with experts like PPR.
Digital Real Estate Investing
One of my favorite approaches to generating rental income is being a digital landlord. Why? Because owning physical real estate can be a high risk investment strategy. It’s risky because you tie up your capital into a physical property where things might happen outside of your control. For example, an HOA might outlaw short term rentals where you own property. Or, an employer may decide to leave a city where you have several rental properties.
But digital real estate isn’t impacted by any of those things. Plus, you can get started with very little money. What are digital real estate assets? They can be anything online that you can find a way to monetize. Some common ways to make money with digital real estate are:
Websites: Online properties that can generate income through various means like e-commerce, content, services, etc. My blog, Nics Guide is an example.
Domains: The URLs that serve as the address for websites; they can be bought and sold, often at a profit.
Mobile Apps: Applications for mobile devices that can generate revenue through sales, in-app purchases, or advertising.
Social Media Accounts: Profiles and pages with significant followings can be monetized or sold.
E-commerce Stores: Online shops that sell physical or digital products.
Digital Products: E-books, courses, software, and any other non-physical products.
Online Marketplaces: Platforms where users can sell their goods or services.
SaaS Platforms: Software as a Service platforms that users subscribe to, typically on a monthly or annual basis.
NFTs (Non-Fungible Tokens): Unique digital tokens tied to digital (and sometimes physical) content, often used for digital art, collectibles, and more.
Digital Media: Stock photos, videos, music, and other media that can be licensed or sold.
Online Forums and Communities: Platforms where members can exchange information or ideas.
Virtual Land or Assets in Metaverses: Parcels of land or items within virtual worlds that can be bought, sold, or developed.
Podcasts: Audio series with a dedicated listener base that can generate income through sponsorships, ads, or subscriptions.
International Real Estate
Now this is one of the really fun real estate investing strategies. Personally, I’m seeing people do this in the hospitality space. One of my local real estate investors bought multiple properties in Costa Rica and lists them on Airbnb as short-term rentals. He gets to basically get paid to own vacation property. That’s not a bad gig 😲.
My husband and I are also looking at buying a property outside of the US. He’s traveled with his business partner to look at boutique hotels and find distressed property opportunities that will bring great returns for our investors.
I hope going through all these real estate investing strategies gives you some ideas on areas you may want to explore further. When I first started, I felt overwhelmed by just how many different ways there are to invest in real estate.
My advice is don’t try to boil the ocean. Pick one strategy that aligns with your goals, interests, and risk tolerance. Master that area first before jumping into another. For example, maybe start with a simple rental property or house hack. Once you get the hang of managing a property, you could look into scaling into multifamily units.
The important thing is to just get started! Don’t get analysis paralysis digging into all the options. And don’t think you need to understand everything before making your first investment. I learned as I went and made some mistakes along the way. But the hands-on experience was invaluable for helping me learn the ropes.
Also, connect with other investors, whether through online forums, local meetups, or a mentor. Learning from others who have been there before you can fast track your success and help you avoid costly mistakes.
Okay, go get after it! Wishing you much success on your real estate journey!
Real Estate Investing Strategies: FAQ
What are the 5 pillars of real estate investing?
The five pillars are core concepts you need to keep in mind as a real estate investor. They are:
Cash Flow: Monthly income generated from investment properties after expenses.
Appreciation: Increase in property value over time.
Tax Benefits: Deductions and credits that reduce your tax liability.
Leverage: Using borrowed capital to increase the potential return of an investment.
Equity: The value increases for you as your mortgage amount decreases.
What is the most profitable real estate investment?
The most profitable real estate investment varies by market conditions and individual strategy, but historically, commercial real estate and multifamily residential properties have offered some of the highest returns.
How do I get started in real estate investing?
To start in real estate investing, you should educate yourself about the market, save for a down payment, choose a specific real estate investment strategy, network with other investors, and consider your first property purchase. You can use resources like BiggerPockets to give you ideas on various strategies.