Most Common Real Estate Investing Strategies

When it comes to investing in rental properties, it's crucial to explore and evaluate all available options. The first step is to choose a real estate investment strategy that aligns with specific goals and learn how to implement it effectively. It’s common to feel overwhelmed by the numerous strategies and approaches available in the real estate market.

So, we’ve narrowed the list down to the common strategies we’ve seen to be successful in the rental property investing space. Below is an overview and a bried explanation of each strategy to help you understand it’s benefits and potential drawbacks.

Buy and Hold Strategy

The Buy and Hold Strategy refers to purchasing a property and holding onto it for years to come. The equity in the property increases as the mortgage gets paid down over time, and the appreciation allows for a potential increase in the return on investment.

Arguably, the buy and hold strategy capitalizes on the compounding effects of appreciation, which is why we often refer to it as a Wealth Creation strategy, as opposed to flipping or wholesaling which are considered to be Active Income strategies.

BRRRR Strategy 

BRRRR stands for Buy, Renovate, Rent, Refinance, Repeat, which are the exact steps an investor would take if they were to BRRRR a property. Here’s an overview of each step:

BUY: Buy a distressed property that needs some work so that you can take advantage of forced appreciation (the increase in property value after renovations).

RENOVATE: At this stage, we typically look to do ‘strategic renovations’ where we focus on making low-cost improvements with the highest potential impact on property and rent value.

RENT: The next step is to then rent the property for a higher amount than it was previously rented for.

REFINANCE: When investors take on a BRRRR, the ultimate goal is to get a large enough refinance cheque that covers the cost of the downpayment and renovation on the property. The difference between what the property was worth before the renovation, and what it is worth after is going to be the refinance amount. This would leave the investor with a cash-flowing property, with none of their own money left invested in it, and a tax-free cheque from the refinance that they can use to invest in the next property.

REPEAT: After a successful refinance, investors typically repeat the process on the next property.

Joint Venture Strategy 

In Real Estate Investing, a Joint Venture refers to two or more parties come together to purchase an income property. There are countless ways in which to structure the Joint Venture agreement.

A common one is to split the profit 50/50.

One partner is considered the ‘money partner’ as they pay the down payment and qualify for the mortgage. The other partner is considered the ‘active partner’ where they find the discounted property, manage the negotiation process and closing, oversee the renovation, and re-rent the property along with possibly being the property manager long-term.

House Hacking Strategy

When considering the transition between renting and owning a property, it’s wise to look into the House Hacking Strategy.

Rather than paying a monthly mortgage payment, the House Hacking Strategy allows investors to live in one unit while renting out the others. That way, they can mitigate the mortgage payment and create the opportunity to live rent and mortgage-free!