The Various Strategies of Real Estate Investing

For those more concerned with securing future incomes and leaving behind generational wealth this is a great strategy. It plays out well and will leave many options to investors who choose to exercise it in the Southern California market where property only seems to appreciate. Finding property where the payment, interest, taxes and insurance (PITI) are roughly equal  to 75% of the monthly rental income will be key to making this strategy work for you on multiple properties.

Residential loans allow for the financing of multi family homes of up to 4 units. Savvy investors take advantage of this strategy by living in one unit, thus being able to glean some of the best financing terms available as a owner occupying borrower, while the sum of the rental income from the other units cover the costs of the mortgage.

This is a strategy made popular by various HGTV television shows that shall remain nameless for our purposes. :)  Buy an ugly house for way below market price, make her pretty again and then sell it as fast as possible for top dollar. This is a great strategy for those wanting to quickly grow their money. Doing your research is of the utmost importance here as you need to be sure of the after repair value (ARV), or the price the house will sell for after being remodeled and certain that there will be room for profit after renovation costs, closing costs x2, real estate commissions and paying the mortgage for as long as the renovations take. In today's market finding these "gems" is often the tricky part.

This method refers to the process where one would "Buy, Rehab, Rent, Refinance and Repeat" real property. For this method to work essentially the transaction must start off looking a lot like a Fix and Flip where an investor would purchase a property that needs some work for well below market price.  The idea here, just like with Fix and Flip, is that once renovated the value shoots up. At that time the property can be rented out to start bringing in rental income to cover the mortgage. Next, the house can be refinanced out of the hard money loan that was used to acquire it and pull out as much equity is allowable. Using that equiity the investor is able to move on and repeat this process over again with another property.

For the investor who has a chunk of change to put down, this is the way to go. Multiple units equates to multiple rental income sources and that typically means a higher overall occupancy rate over the course of a year.

Any savvy real estate investor will tell you that it all comes down to the Cash-on-Cash Investment. For some, a mimimum of 15% Cash-on-Cash is the minimum criteria. "Put simply, cash-on-cash return measures the annual return the investor made on the property in relation to the amount of mortgage paid during the same year." (Investopedia, 2021)