A Guide To Creative Investing
In a traditional real estate deal, a buyer finds a property on the MLS or through a wholesaler, takes out a loan from a bank to fund the acquisition, and rents it out while waiting for it to appreciate before selling.
More and more people are interested in getting started in real estate this way, but new investors should be aware that there is more than one way to profit from real estate. Nontraditional methods can suit would-be investors with less capital, limited access to deals, or simply different circumstances. It could even help you invest without a down payment or achieve profits higher than like-minded peers going the traditional route.
So, what are some of these nontraditional investing methods? In this article, we describe four creative ways to invest in real estate and their benefits for a first-time investor.
#1 Capitalize on Creative Investing with Self-Storage Units
Self-storage is a rapidly expanding industry with lucrative investment opportunities for new and veteran investors alike. In this market, you can capitalize during times of transition by renting out a recession-resistant service: storage.
As a self-storage facility investor, you’ll purchase or construct your own facility for millions of dollars less than you’d spend on a traditional multi-family property. You’ll also reap the benefits of record-breaking profit margins, low-maintenance units, automation and technological innovation, and straightforward leasing.
If you’re up for especially creative investing, you don’t even need a facility to partake in the rewards of this industry. You can simply rent out extra storage space you may have around your home or properties, such as parking lots, garages, and warehouses.
#2 Have Your Tenants Pay Your Mortgage with House Hacking
One of the more popular nontraditional methods of real estate investing is house hacking. It can be done with any type of property and involves purchasing a home with multiple units and living in one while renting the other(s) to tenants.
It’s worth acknowledging that this strategy isn’t suitable for all—not everyone wants to (or can) live in such close proximity to tenant-roommates. You’ll need to put up with temporary discomfort for long-term gain and the plan of eventually moving into your own property. However, the greatest benefit of this strategy is that your tenants can effectively pay off your mortgage for you with their rental payments.
Serious house hackers can even increase the property’s value and force appreciation by strategizing effectively and adding separate bathrooms and kitchens to each bedroom or sub-unit.
#3 Try One of the Best Real Estate Investing Strategies in 2023: Flipping Properties
Another creative real estate strategy we’ll see a lot of in 2023 is flipping properties. Also called “fix and flip,” this strategy is a method of investing where a buyer purchases a property (often a distressed or low-value one), improves it to force appreciation, and then sells it for a profit.
Flipping properties is a highly lucrative investing method, and many investors do it full time. You won’t rent out the properties you flip, so you never have to worry about screening or managing tenants. However, you will need extensive knowledge or access to people with knowledge about maintenance, construction, and value-add properties. You’ll need to know how to force appreciation through adding bedrooms, remodeling kitchens, or other renovations that add more value than they cost. You’ll learn plenty about investing in the process, but be prepared to lean heavily on the sales, construction, and inspection elements rather than managing long-term investments.
#4 Help Create Affordable Housing with Section 8 Investing
Many landlords have heard stereotypes about Section 8 housing or avoid accepting housing vouchers for fear that the tenants will be unreliable or unruly. However, landlords who take tenant screening seriously and take the time to find great renters in the program are likely to find that Section 8 families are low stress, long-term renters. They move less often, and at least 70% of a voucher family’s rent is guaranteed each month as it is sent directly from the federal government.
As with all real estate investing strategies, however, just make sure you’re informed and educated about the Section 8 program before you apply to the HUD on a tenant’s behalf or start advertising your units as Section 8 friendly. Fair housing regulations apply, and in fact, some states even forbid discrimination solely based on source of income or Section 8 status.
Additionally, be sure you have a reliable way to manage your Section 8 tenants. Innago is one of the best real estate apps for investors, and we’re happy to help your Section 8 tenants transition to online rent payments via our platform.
Conclusion
Real estate investing is often romanticized—people envision it as a way to escape their nine-to-five job with little to no work involved. In reality, financial freedom requires your strategic thinking, hard work, and creativity. Thinking outside the box might just help you beat the competition and reach your financial goals faster. If you’re just getting started in real estate investing, take a look at these four creative strategies in more depth and consider how they could propel you on your investing journey.
