22 Real Estate Investment Strategies

With strong historical returns and a recent boom, real estate investing can be a smart wealth-building strategy for short- and long-term horizons. Real estate offers investment portfolio diversification, positive cash flow, and long-term appreciation of asset value. By some estimates, nearly 90% of ultra-high-net-worth individuals built and maintained their wealth by investing in real estate. Below, you'll find 22 real estate investment strategies you can implement to build a new income stream this year. 

Is Real Estate a Sound Investment?

Yes, real estate is a tried-and-true method of building and retaining wealth. However, not all properties are created equal. The property location, condition, rental potential, and growth potential affect the performance of a specific real estate investment.

In terms of diversified real estate investments, data suggests that real estate investment trusts (REITs) on average have outperformed stocks on 20-to-50-year horizons. Most REITs are less volatile than the S&P 500, with some only half as volatile as the market at large, making them a more stable investment opportunity to diversify your portfolio.

However, REITs are one type of real estate investment. You can consider more than 20 types of stable real estate investments. While buy-and-hold long-term is often the best strategy, house flipping has become popular recently due to reality TV. With the right strategy and in-depth market knowledge, this investment strategy can lead to capital gains in under a year. 

Like all investments, success in real estate investing comes down to research and understanding. Speak with local experts, study market trends, and run the numbers to ensure that costs like maintenance or repairs don't outpace profits. With a diversified approach, real estate investing can be a powerful tool for wealth-building.

Real Estate Investment Strategies: A Full List

The best real estate investment strategies vary by individual investors' goals, financial strength, and interest. To start creating your personalized plan, consider these 22 types of real estate investment strategies and how each can help you reach your financial goals. 

1. Buy and Hold Strategy: Securing Long-Term Gains

The buy-and-hold strategy involves acquiring properties and intending to hold onto them for an extended period. This approach allows investors to benefit from property appreciation and generate passive rental income. To succeed with this strategy, focus on areas with strong growth potential, low vacancy rates, and positive cash flow projections to create passive income from the first month. 

2. Fix and Flip: Maximizing Profits through Renovation

The fix-and-flip strategy involves purchasing distressed properties, renovating them, and selling them at a higher price. Successful execution requires careful market analysis, cost estimation, and effective project management. 

Speak to experts and double-check all calculations before proceeding, as house flipping can also lead to losses. However, if you renovate a property strategically you may increase its value significantly and attract potential buyers. 

3. REITs: Hands-Off Investment Opportunities

Investing in REITs allows you to gain exposure to the real estate market without directly owning properties. REITs are companies that own, operate, or finance income-generating properties. They offer attractive dividends and liquidity, making them an excellent option for passive investors seeking steady income and portfolio diversification.

 4. Rental Property Diversification: Spreading Risk Across Multiple Assets

Diversifying your rental property portfolio across different locations and property types can reduce risk and improve overall returns. Consider investing in residential, commercial, and industrial properties to balance potential income fluctuations in various market conditions. Likewise, consider properties in different geographic locations to reduce the risk associated with natural disasters. Learn more about managing rental properties. 

5. Real Estate Crowdfunding: Pooling Capital for Collective Investments

Real estate crowdfunding platforms enable multiple investors to pool their resources and invest in larger properties or projects. This strategy provides access to opportunities that may have been out of reach for individual investors and allows for more diversified investments. Crowdfunding can be one of the best ways for investors with limited funds to start investing in commercial real estate directly. 

6. Wholesaling: Finding Great Deals for Quick Profits

Wholesaling involves identifying undervalued properties and quickly entering into contracts to sell them to other investors. As a wholesaler, you act as a middleman and make a profit from the difference between the contract price and the selling price. In-depth market knowledge with effective negotiation and networking skills are crucial in this strategy. However, wholesaling doesn't require upfront capital.

7. 1031 Exchange: Deferring Taxes for Continued Growth

A 1031 exchange allows real estate investors to defer capital gains taxes by reinvesting the proceeds from selling one property into purchasing another like-kind property. This strategy enables investors to grow their portfolios without incurring immediate tax liabilities. 

If you keep purchasing larger properties, you could continue building a portfolio without capital gains tax. For example, if you sell a four-apartment building and purchase a 10-apartment building, you won't need to pay capital gains tax in the year of sale. Keep doing this with larger properties to grow asset value and monthly income. 

8. Vacation Rental Investments: Capitalizing on Tourist Hotspots

Investing in vacation rental properties can be highly profitable in popular tourist destinations. Short-term rentals often yield higher returns than traditional long-term rentals. However, it's essential to consider seasonal demand, local regulations, and property management logistics to improve profitability. For investors considering hands-off options, hiring a property management company for short-term vacation rentals can offer stable returns and passive income. 

9. Buy and Hold Apartments: Tapping into Rental Demand

Investing in multifamily apartments can be a stable and reliable source of income. Large apartment complexes offer economies of scale and reduced risk compared to single-family homes. You'll gain multiple income streams and the potential for greater tenant stability and reduced management costs. Choose locations with growing populations and favorable rental demand.

10. High-Value Home Flipping: Luxury Property Investments

High-value home flipping targets luxury properties with significant profit potential. It requires a keen eye for up-and-coming neighborhoods and a deep understanding of the high-end real estate market. Upscale renovations and attention to detail are essential to attract affluent buyers. 

Alternatively, consider a complete renovation for older homes in established affluent neighborhoods. High-value home flipping requires a significantly larger budget but when done successfully, it can offer high returns. 

11. Off-Market Properties: Finding Hidden Gems

Exploring off-market properties allows investors to access unique opportunities before they hit the public market. Networking with real estate agents, wholesalers, and local property owners can provide valuable leads on hidden gems with untapped potential. Likewise, driving around target neighborhoods and approaching owners of properties with deferred maintenance can offer purchase opportunities under market value. 

12. Green Real Estate Investments: Embracing Sustainability

Green real estate investments focus on environmentally friendly properties equipped with energy-efficient features. These properties often attract eco-conscious tenants and buyers, offering a competitive advantage in the market and potential cost savings over time. With increased awareness of environmental impacts, this area of real estate investing is poised to see significant growth in the next decade. 

13. Private Lending: Becoming the Bank

Private lending involves providing loans to real estate investors or developers in exchange for interest payments. This strategy allows investors to earn passive income without owning physical properties, making it an attractive option for those seeking reduced direct involvement. In this case, you are the bank for other trusted real estate investors or developers. 

14. Real Estate Partnerships: Combining Resources for Greater Success

Partnering with other investors or real estate professionals can bring complementary skills and resources to the table. Collaborative efforts can lead to larger-scale investments and shared expertise, increasing the likelihood of success in complex projects.

15. Tax Liens and Deeds: Seizing Profitable Opportunities

Investing in tax liens or deeds allows investors to purchase the right to collect unpaid property taxes. These investments can lead to significant returns, but thorough research and understanding of local laws and regulations are essential to mitigate risks. 

This time-intensive and high-risk strategy involves taking part in the collection process. However, having the time or budget to hire full-time employees can lead to significant long-term returns. 

6. Build-to-Rent: Custom Properties for Long-Term Tenants

The build-to-rent strategy involves constructing properties solely to rent them out. Investors can tailor the design and features to meet the demands of target tenants, optimizing rental income and tenant retention. This scenario can work in any market type, with tailored low-cost, mid-range, and luxury properties in diverse developments or areas. 

17. Student Housing Investments: Targeting the Education Sector

Investing in student housing properties near educational institutions can yield stable and consistent returns. Demand for off-campus housing is consistently high, and investing in this niche can provide an attractive income stream. However, student housing may require additional maintenance or stricter screening measures. 

18. Real Estate Development: Creating Opportunities from the Ground Up

Participating in real estate development projects offers the potential for substantial profits but comes with higher risks. Successful development requires meticulous planning, sufficient financial backing, and expertise in navigating regulatory processes. While this opportunity can lead to long-term gains, the risks mean you should strongly diversify in other investments to mitigate potential losses. 

19. Lease Options: Balancing Flexibility and Security

Lease options allow potential buyers to lease a property with the option to purchase it at a predetermined price in the future. This strategy benefits both sellers and buyers by providing flexibility and security in uncertain market conditions. Successful investors can repeat this investing strategy to build a large portfolio and purchase new properties after the sale. 

20. House Hacking: Leveraging Your Living Space

House hacking involves purchasing a property and renting out a portion of it while living in the rest. This strategy can help offset living expenses and provide a stepping stone for future investments. With house hacking, you could rent a room, an apartment above the garage, or the main house. Some house hackers live in tiny houses elsewhere on the property and rent the main house and additional guest spaces. 

21. The BRRRR Method: Buy, Rehab, Rent, Refinance, Repeat

The BRRRR method involves purchasing distressed properties, renovating them, renting them out, refinancing to recover the initial investment, and then repeating the process with the accumulated equity. This strategy allows investors to recycle capital and build a portfolio rapidly.

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a tried and true investment strategy used to build a real estate investment portfolio of multiple properties. 

22. Pre-Construction Investments: Getting in Early

Investing in pre-construction properties can offer substantial discounts and potential appreciation. With these properties, you may have a say in the finishes, the layout, or the landscaping. The additional control gives you the flexibility to customize properties to potential tenants or buyers. 

How to Start Investing in Real Estate

You don't need to be a millionaire to start investing in real estate. Take a look at some top choices below and put the real estate investment strategies discussed above to the test.

A Real Estate Investment Strategy for Everyone

With 22 strategies here, there's a real estate investment opportunity for everyone. Real estate investment strategies for beginners can include REITs or rental properties, while experienced investors may try wholesaling or looking for development opportunities. 

With research, networking, and an understanding of target markets, you'll start building skills to identify investment opportunities. Real estate investing is no longer only for high-net-worth individuals. Start building wealth through real estate this year.

Frequently Asked Questions