A Introduction to some of the pro’s and con’s of popular investing strategies.
In the real estate world, there are four main investment strategies that make your money work for you. In this blog post, we will take a look at these popular investment strategies: turnkey, short-term rental, mid-term rental, BRRR, and flip. Each of these strategies has its own unique benefits and drawbacks, so it is important to understand them all before deciding which one is right for you. Let’s take a closer look at each one!
A turnkey investment property is a fully-renovated rental property that is ready to be rented out. The main benefit of investing in a turnkey property is that it requires very little work on the part of the investor. All you need to do is find a property, build your team, and watch the checks roll in!
The downside of turnkey investments is that they are more expensive upfront. You also can’t pull your money back out as quickly as other strategies.
Short-Term Rental: A short-term rental property is an investment property that is rented out for shorter periods of time (usually less than 30 days). The benefits of investing in a short-term rental property are that you can charge higher rents and get a higher return without the same level of risk as a BRRR or flip.
The downside of short-term rentals is that they require more work on the part of the investor. You will need to find tenants, manage the property, and deal with any issues that arise. Alternatively, learn how to build your team to take care of the details for you.
Mid-term rentals are gaining more popularity in the investment community. A mid-term rental is an investment property that is rented out for longer periods of time, usually between 30 days and 12 months. The benefits of investing in a mid-term rental property are that you can charge higher rents than a long-term rental. Although rents aren’t as high as a short term rental, there are fewer regulations, lower turnover, and fewer guests.
Mid-Term rentals really balance the best of both worlds. The downside is that you may have to deal with more repairs and maintenance than a long-term rental and your return won’t be quite as high as you would see with a short-term rental.
BRRR stands for “buy, renovate, rent, refinance”. The benefits of this strategy are that you can purchase a property at a low price, add value through renovations, and then refinance the loan at a higher value. This allows you to pull out cash from the equity in your home to reinvest in other properties. Ideally, you pull all your cash out or even make a little money in the process.
The main drawback of this strategy is that it takes a lot of time and effort to find the right property and right team to make this successful. There are a lot of factors that go into a BRRR and they all have to work together.
A flip is when an investor purchases a property, renovates it, and then sells it for a profit. The benefits of flipping are that you can make a quick profit if you do it correctly. This is a great strategy for those who need to build capital quickly or aren’t able to leave money in a deal yet.
The downside of flipping is that there is always the potential for something to go wrong during the renovation process, which can eat into your profits. Flipping also means you don’t get the tax benefits of holding a property long term and all your profits will be taxed.
So, there you have it! An overview of five popular investment strategies. Which one is right for you? Only you can decide! If you need help deciding which strategy is best for your goals and risk tolerance check out our post on risk tolerance or connect with our community of investors to learn more about the pro’s and con’s of each strategy.