My Favorite Real Estate Investment Strategies

Investing in Real Estate Series — Week 5

Have you ever thought about owning an investment property? Then this series is for you!  I’m covering everything to know when it comes to investing in real estate, including the different options out there and how to make it happen.

You’ll also get a complete rundown on why investing in a rental property can boost your finances, the tax benefits, plus what you need to know about being a landlord, how you can best flip the right property for a profit, an investment strategy for move-up homeowners, and how you can save money when it comes time to sell an investment property.

This week you’ll learn my two favorite real estate investing strategies.  I hope they give you some ideas about how you could invest in real estate too. 

I hope you’ve been enjoying this investing in real estate series.  One of the reasons I became a real estate agent is because I believe in the wealth building power real estate can provide. 

Of course, it’s a good idea to diversify your investment portfolio and you should speak with a certified financial planner about how to do that. 

But, when it comes to real estate, there are many different ways you could invest and today, I want to share my favorites. 

I’ve worked with all types of real estate investors over the years, including first time investors, and I’ve seen all types of strategies used.  

I’ve seen properties at auction site unseen—super risky and not something I recommend for most people. 

I’ve seen properties bought that no one else wanted to buy because they needed so much work—thank goodness for amazing contractors and all the ideas from various online sites! 

But, today, I’m going to share not just one, but my TWO favorite ways to invest in real estate. 

Moving and Keeping Your Current Home As A Rental Property

If I had to pick just ONE real estate investment to do, this would be the one.   This is the investment strategy that I’ve seen past clients use the most over the years. 

Here’s how it works:

As our life changes, so must our homes.  Gone are the days when we buy one home we own forever. 

So, when it comes time to move, keep the home you have as a rental property and then move on to your next home.

At first glance, you might be thinking, “Don’t I need the money from my current home to buy my next home?” 

Maybe, but maybe not.   When you are ready to move from your current home, it’s important to talk to your team of advisors—me, your loan officer and financial planner.  Together we can look at your financial situation and the financing options available to you and provide our best recommendation. 

This strategy could be more possible for you than you think and it’s worth looking into.

Here’s why it’s such a great strategy:

When we buy a home, we are going to move into, not only do lenders require less down, but the interest rate is lower than if you were to buy an investment property, you’ll never live in. 

So, you’ll save on both downpayment and the interest rate when you buy a home you plan on moving into and then when it’s time to move, keeping it and turning it into a rental. 

While it’s a rental, you get the standard benefits of having an investment property—tax advantages, someone else paying down your mortgage and equity gain. 

A word of caution—there are lender rules about how long you must live in a property and your intentions when you buy it.  Don’t commit loan fraud by saying you are going to live in a property for a long time to come if that’s not your intention.  I’m suggesting that you buy a home with every intention of living there and loving it for years to come, but when it comes time to move—5 or 10 years from now, look into how you can keep it, rent it and move on to your next home all at the same time.

Buy and Hold Long-Term Rental For Your Kids College or Your Retirement

Here is another little-known strategy that can help you pay for your kids’ college, no matter where they want to attend, or if they don’t want to go to college, help them with trade school or even starting a business. 

This is a more conservative long-term buy-and-hold strategic investment with a specific goal.  So, you as an investor buys a property at the birth of a child, with a 15-year mortgage.  This is a rental property; ideal location would be in a college or university town, because they have many potential renters.    Typically, 15-year mortgages have lower interest rates than 30-year mortgages, but higher monthly payments. 

Initially, cash flow will be minimal.  That means the rent you get for the property will not pay off the entire mortgage payment, but most of it, typically.  Of course, a savvy investor will want to have the monthly rental income pay off the entire mortgage payment from the get-go. 

As time goes on, the rental payments will increase.   So, whenever the rental payment is higher than the mortgage payments, you put that extra money into a savings account.   After 15 years, your mortgage will be paid off.  All your rental income will be put into the account (after paying any expenses).   Also, you will have tax benefits as a rental investor.  As stated before, always check with your tax advisor, loan advisor and real estate agent to understand the risks involved

In 18 years, when your child is ready for college, or trade school, you can sell the property and have the money for any college or school of their choice.  No student loans!

 Keep in mind that over the long haul, real estate values increase 5% on average each year – some years are higher, and some are lower – but over the last 50 years, it has been averaging 5%.  So, when running your numbers, figure on the property you buy will increase in value 5% each year you have it.  That will give you an idea of how much you will make at the time of the sale in 18 years, depending on the market it is in.   

There you have, it, a great strategy to pay for your child’s higher education, no matter where they go.    You can even try this for each child you have.   Even if you already have young children, you can still do this strategy.  You might not have the mortgage paid off, but you will have equity and rental income at the time of the sale. 

I personally know of parents that did this with a plot of land they bought and held for a few years, that was able to pay off a big chunk of both of their kids college tuition. 

And if you do not have kids, you can have a nice nest egg for retirement with this investment strategy.

If you or anyone you know has been thinking about wanting to invest in real estate, I’d love to help.  There are so many great ways to add real estate to your investment portfolio depending on your goals and financial situation.  Schedule a time to talk here (Click Here To Schedule) and let’s make it happen.  😊