Real estate is a popular choice for a lot of investors. Although there are plenty of opportunities to make a profit, for anyone new to the real estate market, it can be difficult to know where to start. If you’re looking for inspiration, this article will cover four simple ways for beginners to get started in investing in real estate.
1. Lipstick Flip
The “lipstick flip” is a way for new real estate investors to make small profits within a smaller time frame, and without a lot of the hassle associated with larger projects. In order to carry out a lipstick flip, you would find a property that needs small, minor repairs — ideally under $5 — and carry these repairs out; then you would market and resell the property for a profit.
If successful, this process can then be repeated. This type of renovation can be carried out by beginners. However, for it to be successful, some of the skills you would need include project management, business, and real estate knowledge. You would also need connections in the industry, funding for the project, and enough time to complete the work and market the property for the resale.
2. Buy and Hold
Real estate investors looking for ongoing income for the future could benefit from buying to rent. These properties would usually be purchased through finance. Ideally, this property would be in good condition — although it may need minor repairs, which would need to be carried out first by the landlord or another maintenance firm. Then, the owner would be able to collect a passive monthly income from their tenants.
One of the benefits of this type of investment is that it usually requires less capital investment; although, you do need to secure funding for the property as well as paying for the repairs, maintenance, and marketing. If you choose to manage the property yourself rather than using an agent, you also need to consider whether you would have the time and connections needed to ensure the project runs smoothly.
3. Wholesale
The wholesale method uses real estate contract rights to purchase cheap properties and make a fast sale for a profit. The real estate contract rights allow the buyer to make payments directly to the owner rather than securing finance. This allows them to sell the property faster. Using this method, you can find underpriced properties where the owner is looking for a quick sale.
Then you would find a buyer, assign the contract on to them, transfer the contract and keep any profits. The main benefit to this is that it has a quick turnaround and is relatively low-risk. It also requires very little investment up front. However, you do need to have knowledge, understanding of real estate laws, and plenty of connections with sellers and buyers.
4. BRRR&R (Buy, Renovate, Rent, Refinance & Repeat)
For investors looking for short-term gains, at the same time as making a long term passive income, the BRRR&R method can offer both simultaneously. This type of investment involves purchasing cheap properties, which may need minor repairs or work — similar to the lipstick flip, as mentioned previously. Following this, the buyer would do the work needed, then rent the property out, while refinancing to release enough funds for the next investment.
This type of investment can be effective in making more profits in a smaller time frame, as well as giving long term rental income. In terms of resources, investors need money for the repairs, maintenance, and funding for the property; knowledge of buy and hold, real estate laws, and project management; and connection with sellers, tenants, and contractors.
For more information on these strategies, check out the infographic below provided by We Buy Houses Phoenix INC.
