Six Real Estate Investment Strategies with Minimal Risk
As a real estate investor, it’s essential that you remember: any form of investing strategy carries risk.
As such, it would be prudent to educate yourself about low-risk real estate investing strategies – you could find they offer an optimal balance of risk and profit potential.
Below we outline six low-risk real estate investing strategies.
1. Real Estate Crowdfunding
Real estate crowdfunding opens the door for a broad array of investors to invest in real estate projects via user-friendly online platforms, reducing entry barriers for smaller players into traditionally larger real estate markets.
Crowdfunding encourages community involvement in projects by offering opportunities for collective investment and shared success.
Why this Is Low-Risk
Crowdfunding in real estate offers low risk through decentralised investing; by spreading investment across a number of contributors, crowdfunding mitigates any financial impact to any single investor and provides an ideal alternative for those hesitant about high-stakes investments.
Who Crowdfunding Is For
Crowdfunding can be the ideal solution for new or small-scale investors looking to break into real estate without significant funds, while also appealing to those who prefer an approach which allows for collective decision making and risk sharing.
2. Real Estate Syndication
Real estate syndication involves pooling funds from multiple investors to purchase a single property – typically one larger or more expensive than can be purchased individually.
This method enables investors to take advantage of high-value real estate opportunities without shouldering all the financial risk themselves. Furthermore, syndicating provides professional management that reduces both workload and expertise requirements for the individual investor.
Real estate syndication reduces risk by spreading it among multiple investors and spreading financial obligations more evenly among participants, and providing protection from market volatility through collective investments in larger properties with potentially more stable properties.
Who Is This For
Primarion can be an attractive investment strategy for investors with more capital available to invest, yet do not want the hassles and complications associated with sole ownership of real estate assets.
3. The BRRRR Method
The Buy, Rehab, Rent, Refinance and Repeat method is an efficient strategy to building real estate portfolios. It involves purchasing undervalued properties before renovating them to increase their value before refinancing and refinancing to refinance them and repeat this cycle until a portfolio has been built up over time.
Once rehabbed and rented out, these properties are then refinance to cover renovation costs allowing investors to repeat this process with new properties.
Reasons this strategy is low-risk
The BRRRR strategy offers low risk due to its focus on adding value through renovations while simultaneously creating cash flow through rentals. Investors can then refinance most of their invested capital back, thus decreasing how much is tied in a single property.
Who This Approach Suits
This strategy is ideal for investors who have extensive knowledge in property renovation and management. Additionally, this long-term investment approach allows wealth to accumulate through property accumulation and equity growth.
4. Real Estate Investment Trusts (REITs)
REITs provide investors with a way to invest in property portfolios without directly purchasing physical real estate. REITs are commonly traded on major stock exchanges, providing easy entry and exit.
This strategy emphasizes income generation as REITs must distribute most of their taxable income to shareholders.
Why This Is Low-Risk REIT investing can be considered low risk due to their diverse portfolios of income-generating properties that typically offer steady returns and their greater liquidity compared to traditional real estate investments.
Who Should Consider REITs
REITs offer investors looking for exposure to real estate without the complexities associated with direct property ownership an excellent opportunity for regular income distributions, making them suitable for retirees or income-focused investors looking for more liquid investments and regular payouts of income distributions such as regular dividends.
5. Airbnb Arbitrage
Airbnb arbitrage refers to leasing properties long-term before subleasing them as short-term rentals through platforms like Airbnb. This strategy capitalizes on any differences between long-term lease costs and short-term rental income, and short-term rental rates often surpassing long-term lease costs in high demand tourist or business areas.
Airbnb arbitrage can be considered low risk because it does not involve property ownership; your main investment would be lease and setup costs.
This strategy capitalizes on the difference between long-term lease costs and short-term rental income, potentially producing higher returns without incurring property ownership commitment.
Who Should Implement It
This strategy is ideal for individuals who possess expertise in short-term rental markets and hospitality and customer service skills, who prefer not investing large capital amounts into purchasing property but are adept at creating appealing rental spaces.
House Hack Short-term Rentals This option may be best for individuals who already own their home and are interested in short-term rentals as an investment strategy.
Start by searching for short-term rentals in areas of high demand.
Save up ten percent to purchase the property, then rent it out when not needed.
Conversely, when you do occupy it, rent out your primary residence as this provides two cash-flowing properties that eventually will become free and clear properties for you to own.
Once you’re comfortable managing a single short-term rental property, consider increasing your short-term rental portfolio.
Why This Strategy Is Low-Risk House hacking short-term rentals is a low-risk strategy as it diversifies income sources while spreading financial risk across various properties. Ideally, high demand areas should be targeted as this helps maintain steady rental income and property values.
Who This Approach Suits
This strategy is best suited for homeowners with experience managing properties and dealing with short-term rentals, or those looking to enter real estate investing with minimal disruption to their daily routine.
View our video below for additional advice on implementing this strategy.
