Next Trending Real Estate Strategy

[Jared Dewey]

Pretty new to the game of real estate here. People talk all the time about amazing strategies and then others chime in with their opinions that the strategy is dead, it doesn't work any more, etc. etc. My question to you guys is: What is the next best strategy? What are some strategies that are dead and or strategies to steer clear away from? What is the tried and true method? Let me know your opinions in the comments below.

[Eliott Elias]

Creative finance is king in this market. Study Pace Morby.

[Chris Seveney]

@Jared Dewey

It’s not a one size fits all. Find something you are good out and enjoy doing. There is opportunity in every aspect of real estate

[Don Konipol]

Quote from @Jared Dewey:

Pretty new to the game of real estate here. People talk all the time about amazing strategies and then others chime in with their opinions that the strategy is dead, it doesn't work any more, etc. etc. My question to you guys is: What is the next best strategy? What are some strategies that are dead and or strategies to steer clear away from? What is the tried and true method? Let me know your opinions in the comments below.

1. Buy and Hold - Simplest strategy with least risk. However, unless high leverage is combined with high inflation, takes a long time to accumulate wealth. Great for self directed retirement funds (especially Roth) when investor is 45 or younger.

2. Buy and Hold with Value Added – Requires knowledge, experience, time and capital than simple Buy and Hold. Higher ROI, faster wealth accumulation. Harder to find, identify and finance target properties. Greater risk of costly mistakes. Not as forgiving as simple Buy and Hold.

3. Fix and Flip Residential – Relatively simple strategy requiring knowledge of construction costs, property valuation and appraisal, managerial ability. Transactional profit; wealth building has to come from saving and investing the resultant profits. A hybrid between an investment and a business.

4. Fix and Flip (Reposition) Commercial – Potential high ROI often requires either joint venture partner or deal syndication. Besides usual skill set of construction, real estate and managerial knowledge and ability requires local market knowledge and property segment knowledge.

5. Development - Highest risk potential highest reward strategy. Requires all skills and knowledge described above PLUS risk containment/modification, investor relations, financing knowledge, and patience to go through multiple layers of bureaucracy to obtain the numerous approvals necessary to finalize the project. Get ready to spend a lot of money upfront for professional drafting, architectural, engineering and environmental studies, reports, forecasts, etc.

6. Distressed Property Purchase – This covers the broad spectrum of strategies that hopefully result in the purchase of a property significantly below market value. Main skill set is analytical ability and negotiating expertise. This is an area where high ROI can be combined with relatively low risk. The downside is that everybody and their brother is looking for these deals. Best way to secure this kind of deal is when you find one have the cash available to provide a large non refundable earnest money deposit and to close quickly. Wealth building can be accelerated with just a few of these deals if successful.

7. Wholesaling – actually isn’t wholesaling as wholesaling is …… well, lets not go there and just agree to call it “wholesaling”. Basically a TIME risk as little capital would typically be invested. UNLESS the wholesaler really wants to compete in the market and then they can spend $10,000 per month on marketing. Some say its brokering without a license, others say its not investing its a job, both probably true. I do know some large wholesalers who earn a relatively large steady profit year after year and build wealth by saving and investing. Over hyped with many false promises by gurus selling $30,000 mentoring programs to people with little capital but the ability to extend their credit card limits. Got to be a 99% + failure rate. My advice – if this is what you want to do just become a real estate agent and wholesale on the side.

8. Investing in Syndications, Funds, Joint Ventures as Passive Investor - Limited returns but carefully chosen a portfolio can ROI at 12%. Need to research both sponsor and investment thoroughly, and diversification is key so one disaster beyond your control doesn't put a dent so big in your net worth that it sets you back 10 years. I'd recommend a minimum of 10 different investments with at least 5 different sponsors spread out evenly.

9. Hard Money Lending – If done on your own actually requires MORE knowledge than investing in property. Returns in the 12-15% range depending on the amount of risk, and if you're comfortable/confident to lend secured by commercial real estate or you want to stick to SFR. Moderate risk for a moderate/high return.

10. Short Term Rental – High day to day involvement make this a business as much as or more than an investment. Returns superior to buy, hold, and rent IF you don't consider the value of your time and expertise. Some people will tell you technology will allow you to run the STR from anywhere; while this may be true it still takes a considerable amount of time. Plus, you're "on call' 24/7. Hiring a property manager eats into a lot, if not most of the profits in excess of what you could make with a standard long term rental. Some have had success with the hybrid of Mid Term Rental, which is similar to furnished rentals.

11. Triple Net Lease – with a credit tenant its very low risk and very low returns. More like a long term corporate bond. With non credit tenant returns can be MUCH higher – I’ve had returns in the 15-20% annual range, but risk of tenant default makes this a medium to medium high risk investment.

12. Hotels – A business with a real estate investment aspect IF you’re the owner-operator. If you own the real estate and lease to a management company then this takes on the properties of aa Triple Net Lease. There’s also the option to own the hotel or motel and hire a management company on a set fee or percentage of revenues basis, which would put this somewhere in between on the risk/return scale.

[Jonathan Aversano]

People will say BRRRR is dead, but the principal of buy low, add value, sell high is always good in real estate, and just about any investment. Just isn't as easy to find great deals in 2023 with the rates environment. This strategy will always work for the right property with the right price, which is just harder to come across right now. 

[Bob Floss II]

I'm seeing a massive increase in 'Subject To' deals to maintain sellers low interest mortgages. It's a good strategy for short term holds if the buyer plans to flip or refinance in a year or two, but I wouldn't recommend long term holding. Eventually the banks will start cracking down.

[Anna Cerda]

Quote from @Eliott Elias:

Creative finance is king in this market. Study Pace Morby.

 have you bought properties with creative financing?

[Evan Polaski]

@Jared Dewey, the fact of the matter is any strategy can work and every strategy can be a bad performer.  Real estate is no different than any other industry: you need to know what you are good at, where your strengths are, and what clients want (clients being buyers/tenants) and fill that void.

There are syndications that continue to succeed and there is the syndication that sent 3,200 units back to the lender last month.

There are SFR owners that are doing great with turnkey properties and there are those that are selling for a loss and will likely never be in the space again.

You also have companies like Motorola that had the hottest phone on the planet in the early 2000's with the Razor, that had their mobile division nearly bring down the whole company in 2009, until the split.  Not to say real estate is quite as dramatic as consumer goods, but you see the flips that sit on the market because they are over improved and asking too much, or the design doesn't cater to the typical buyer in that neighborhood, or the flipper only handled aesthetics and didn't address major structural/mechanical needs because they didn't know those issues would kill the deal on inspection.

You also have to realize that all these "strategies" have been around forever. BRRR is just what people did, but never had a label until about 10 yrs ago. Syndication has been around since the beginning of commercial real estate, but never had a label and you used to have to know someone.