Noah George - Real Estate Strategies Investors Should Know About

Noah George - Real Estate Strategies Investors Should Know About An ideal real estate investment is one that generates enough rental income to pay for the operating expenses and mortgage payment, and still leaves you with money in the bank at the end of each month.

There are several ways for real estate investors to reach the goal of positive cash flow. The path to financial freedom begins with choosing the right real estate investing strategy.

Main Types of Real Estate Investing Strategies There are three main strategies for investing in real estate: Core Value Add Opportunistic Each strategy works a different way to help you achieve success as a real estate investor.

The balance between risk and reward is different, and they are also a key tool you can use to narrow down your options when choosing what, where, when, and how to invest in real estate.

Core Core investments generate predictable returns from newer property leased to qualified tenants. Core real estate has the lowest level of risk but also the lowest returns, in exchange for the reduced amount of uncertainty. Property is rated as Class A and is found in neighborhoods and school districts with the highest ratings.

Value Add Value Add property allows investors to increase cash flow or market value by doing strategic updating, adding square footage, or creating incremental revenue streams in small multifamily property. Risk and reward are evenly balanced in value add investments due to the potential for increasing returns.

Class B real estate is found in neighborhoods and school districts with average to aboveaverage ratings. When located on the fringes of Class A areas, investing in Class B property may become Class B+ or greater as the surrounding areas continue to grow and gentrify.

Opportunistic Property purchased using an opportunistic real estate investing strategy includes wholesale and fix-and-flip property and ‘cash cow’ rental property.

The first two opportunistic types of real estate require a lot of capital and a high level of risk in exchange for a potentially big reward if the market timing is right.

Cash cow property is usually Class C real estate that is older construction with an acceptable level of maintenance. Although tenant turnover may be higher, rental incomes normally remain consistent due to renter demand. But, because of the below-average neighborhoods and school districts, cash cow property normally offers little possibility for appreciation.

Residential Real Estate Single-family houses: There are about 95 million single-family homes in the U.S. It’s easy to find houses to invest in and in many real estate markets they’re the type of rental property many tenants want.

Multi-family property: Small multi-family properties such as duplexes, triplexes, and fourplexes (2, 3, and 4-unit properties) are a great way to multiply the cash flow in your portfolio by investing in rental ‘units’ rather than houses.

Wholesaling: Real estate wholesalers locate motivated sellers, put the property under contract and estimate the cost of needed repairs, then assign the contract to a real estate investor in exchange for a wholesale fee. Teaming up with a wholesaler you can trust can be a great way to find deals with instant equity, although you’ll also need to locate a tenant.

Fix-and-flip: Similar to wholesaling, except the fix-and-flipper closes escrow, performs the needed rehab, then resells the property as quickly as possible. This type of real estate investment focuses on short-term gain instead of recurring cash flow. Fixing-and-flipping may sound good on paper but requires a lot of time and capital and a very high tolerance for risk if the deal doesn’t work out as planned.

Commercial Real Estate Apartment buildings: Larger apartment buildings such as low-rise, mid-rise and high-rise; garden-style communities, mixed-use projects (usually with office or retail property on the same site); and special-use multi-family development such as student housing, senior housing, and affordable and subsidized housing.

Office: Divided into urban and suburban properties and classified into Class A, B, and C office buildings. Office property types include single-tenant, multi-tenant, medical, coworking, and build-to-suit.

Retail: Includes small storefronts in downtown or suburban business districts, and individual suites in small strip centers, neighborhood shopping centers, outlet stores, regional malls, and power centers.

Industrial: Usually located near major transportation routes in suburban areas of the market. Common types of industrial property include distribution for ‘last mile’ deliveries, bulk warehouse, light assembly, heavy manufacturing, flex industrial (combination of office and warehouse), and telecom/data hosting centers.

Land: Often purchased as a speculative investment while the surrounding area develops.

Farm and ranch land, raw land, undeveloped land, subdivided lots in a subdivision, urban infill plots in the inner city, and brownfield land that has undergone an environmental cleanup and is ready for re-development.