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6 Effective Real Estate Investment Strategies

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Opinions expressed by Entrepreneur contributors are their own.

As a real estate investor, you might encounter varying advice about investing on the internet, social media and from other investors. Some of these sources may claim they know best, but there are many effective strategies for investing in real estate. There isn’t a single strategy that is the best approach for every landlord. In fact, your real estate investing strategy should reflect your personal long-term goals, available resources and current circumstances.

Plus, your investing strategy can — and should — change as your needs change. The success of your rentals isn’t tied to one investing strategy, but rather the skills you’ve built, the tactics you’ve learned and your ability to shift between different strategies when needed.

Below are six great real estate investing strategies you may use at various points in your investing career:

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Related: Master These 6 Skills to Succeed as a Real Estate Investor

1. House hacking

House hacking is a popular investing strategy wherein you buy a property, live in half and rent the other half out. The rental income you receive helps reduce your monthly mortgage payments on the property.

This strategy works well with duplexes and other multiplexes because you can maintain a clear division between your and your tenant’s spaces. However, some investors also rent out a basement or bedroom from their single-family home (SFH).

House hacking is a trendy and widely used investing strategy for several reasons. For one, it’s an excellent way to transition to real estate investing for new landlords. This is especially true if you learn to manage your rented unit or bedroom with property management software. Software helps you carefully track your income and expenses while you establish your business. Another benefit of house hacking is that it allows you to get a residential mortgage because you’ll be living on the property as well.

In the long run, this strategy’s aim is to make it possible for you to move out and transition the property into a full-blown rental.

2. BRRRR deal

BRRRR investing is another effective strategy made popular by Brandon Turner on Bigger Pockets. BRRRR stands for buy, rehab, rent, refinance and repeat:

  • Buy: Buy a property at below-market value.
  • Rehab: Renovate and improve the property by adding value.
  • Rent: Rent out the property to cover the mortgage.
  • Refinance: Get the property reappraised, then use cash-out refinancing to secure an advantageous mortgage.
  • Repeat: Use the capital you recovered from the deal to invest in more properties.

With BRRRR, the idea is to capitalize on a property others may have overlooked due to its low face value or apparent lack of potential.

To use the BRRRR strategy, target properties that are sound investments despite needing some work. Focus on improvements that increase value: installing hardwood flooring, adding extra bedrooms or remodeling kitchens and bathrooms. The value added from these improvements will improve your property appraisal and help you secure more funds to invest elsewhere.

 

3. Wholesaling/driving for dollars

Wholesaling is a strategy many investors use to capitalize on great deals. In this strategy, you find a property that will make a good deal, facilitate a sale between a buyer and seller, and then collect the difference between the seller’s price and the amount the buyer pays.

To succeed with this strategy, you need to be informed about which properties are currently on the market. You can use popular listing sites, the Multiple Listing Service (MLS) or a strategy known as “driving for dollars.” This involves manually searching neighborhoods for properties that look promising.

One downside of wholesaling is that you need strong marketing and sales skills. If you don’t have this skill set and don’t want to work to acquire it, wholesaling might not be for you.

4. Flipping properties

Flipping properties is like BRRRR in that you buy, renovate and improve a property. However, with house flipping, the end goal is to sell the property, not rent it out.

House flipping works best when you renovate and flip as quickly as possible. The longer you wait to sell, the more mortgage payments you must make. Like BRRRR, house flipping works best with properties listed at below-market value or those that are easy to improve at low costs. This way, improvements can significantly increase the property’s value and lead to quick turnovers.

One downside to this strategy is that you’ll have higher capital gains taxes because you sold the property so quickly. You’ll also need help to successfully pull off house flipping — specifically, you’ll need a team of builders and renovators and access to high-quality materials at a relatively low cost.

5. Syndications

Syndication is often considered a more passive real estate investing strategy. However, with careful decision-making and an active eye on the process, syndication can lead to great gains. The main idea with the syndication strategy is to pool your funds with other accredited investors to buy real estate.

Here’s how it works: You pay syndicators to locate and manage most deals, then benefit from the profit. Syndication can be public or private. Public syndication is usually operationalized through a syndication marketplace, while private syndication is managed manually by investors.

Crowdfunding is a specific type of syndication investing that involves accredited and non-accredited investors alike who contribute and profit from deals. If you choose the crowdfunding path, you’ll work with a broader range of investors. You also won’t be expected to contribute as much entry capital as you would with traditional syndication (typically only around $50-$1,000 is required).

If you choose the syndication route, be picky about who you work with. You want to ensure your investments are in good hands, even if you didn’t contribute as much initially.

 

6. Live-in-then-rent

The live-in-then-rent strategy is a modified house-flipping scenario. Essentially, your property is a SFH (usually) that you live in initially and then turn into a rental after you move out. The main difference between live-in-then-rent and house hacking is that you don’t live in the property and rent it at the same time. Instead, these are two separate phases.

Live-in-then-rent is a great strategy for people who don’t want to live closely with their renters but still want to participate in real estate investing on their budget.

With so many ways to invest in real estate, it may seem challenging to devise a strategy that meets all your needs. However, by catering your investing strategy to your particular goals, you can successfully cultivate your real estate business.

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Zacks Investment Ideas feature highlights: Alphabet, Tesla, Shopify, Amazon and Palo Alto

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For Immediate Release

Chicago, IL – February 2, 2023 – Today, Zacks Investment Ideas feature highlights Alphabet GOOGL, Tesla TSLA, Shopify SHOP, Amazon AMZN and Palo Alto Networks PANW.

Which of These Stocks Has Been the Best Buy, Post-Split?

Stock splits have been a regular occurrence in the market over the last several years, with many companies aiming to boost liquidity within shares and knock down barriers for potential investors.

Of course, it’s important to remember that a split doesn’t directly impact a company’s financial standing or performance.

In 2022, several companies performed splits, including Alphabet, Tesla, Shopify, Amazon and Palo Alto Networks. Below is a chart illustrating the performance of all five stocks over the last year, with the S&P 500 blended in as a benchmark.

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As we can see, PANW shares have been the best performers over the last year, the only to outperform the general market.

However, which has turned in a better performance post-split? Let’s take a closer look.

Tesla

We’re all familiar with Tesla, which has revolutionized the EV (electric vehicle) industry. It’s been one of the best-performing stocks over the last decade, quickly becoming a favorite among investors.

Earlier in June of 2022, the mega-popular EV manufacturer announced that its board approved a three-for-one stock split; shares began trading on a split-adjusted basis on August 25th, 2022.

Since the split, Tesla shares have lost roughly 40% in value, widely underperforming relative to the S&P 500.

Palo Alto Networks

Palo Alto Networks offers network security solutions to enterprises, service providers, and government entities worldwide.

PANW’s three-for-one stock split in mid-September seemingly flew under the radar. The company’s shares started trading on a split-adjusted basis on September 14th, 2022.

Following the split, PANW shares have struggled to gain traction, down roughly 15% compared to the S&P 500’s 3.3% gain.

Shopify

Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.

SHOP shares started trading on a split-adjusted basis on June 29th, 2022; the company performed a 10-for-1 split.

Impressively, Shopify shares have soared for a 50% gain since the split, crushing the general market’s performance.

Alphabet

Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.

Last February, the tech titan announced a 20-for-1 split, and investors cheered on the news – GOOGL shares climbed 7% the day following the announcement. Shares started trading on a split-adjusted basis on July 18th, 2022.

Alphabet shares have sailed through challenging waters since the split, down 10% and lagging behind the S&P 500.

Amazon

Amazon has evolved into an e-commerce giant with global operations. The company also enjoys a dominant position within the cloud computing space with its Amazon Web Services (AWS) operations.

AMZN’s 20-for-1 split was a bit of a surprise, as it was the company’s first split since 1999. Shares started trading on a split-adjusted basis on June 6th, 2022.

Following the split, Amazon shares have lost roughly 18% in value, well off the general market’s performance.

Bottom Line

Stock splits are typically exciting announcements that investors can receive, with companies aiming to boost liquidity within shares.

Interestingly enough, only Shopify shares reside in the green post-split of the five listed.

Why Haven’t You Looked at Zacks’ Top Stocks?

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Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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$13 million investment in Campbellford Memorial Hospital

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The Campbellford Memorial Hospital will be receiving a $13 million investment from the Ontario Government to address infrastructure concerns.

The announcement was made at the hospital by Northumberland—Peterborough South MPP David Piccini.

The $13 million is broken down as follows:

  • $9,639,900 will be going to CMH as one-time capital funding to address the HVAC and generator
  • $1,874,929 for reimbursement of CMH’s COVID-19-related capital expenses
  • $771,797 in COVID-19 incremental operating funding
  • up to $600,000 in one-time funding to support the hospital’s in-year financial and operating pressures
  • $163,600 in pandemic prevention and containment funding
  • $81,132 through the Health Infrastructure Renewal Fund
  • $46,884 in health human resources funding.

Interim President and CEO Eric Hanna welcomed the news, saying much needs to be done about the HVAC and generator.

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At the announcement, Hanna spoke of the issues with the generator.

“I’ve got the wee little generator up at the lake and then I’m thinking well, everything should be going well at the hospital,” Hanna told the audience in attendance.

“You get a call from the person in charge who says, ‘Guess what Eric? Generator didn’t start. Oh, so what does that mean? There’s no power in the hospital.’  That’s happened a couple of times in the past year and the generator is over 30 years old.”

Hanna says the solution was not as easy as replacing the generator.

“You can go buy the generator and that may be about a million dollars. But then when we found out afterwards, we came to hook up the new generator to the electrical distribution system and said it won’t work with that because your electrical distribution system is 1956. You can’t plug this generator into that. So now we’re putting close to $5 million into a whole electrical distribution system so the generator will work. It’s part of that ongoing thing and that’s why these costs continue to go up.”

The HVAC system was also something addressed by Hanna.

“It’s a contract close to $7 million to replace that. This wing, for example. There’s no fresh air in this wing. It hasn’t worked in here for 15 years. So now this is administrative areas and the concern was that in some of the patient carriers, it wasn’t working either.  So – having those discussions with David (Piccini) and saying what we have to do to correct this.”

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Chile’s Enap Set to Slash Debt Burden That Weighed on Investment

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(Bloomberg) — Enap, Chile’s state oil and gas company, plans to use near-record earnings to slash its debt burden, while increasing investment in its refineries and in exploration and production.

The company aims to reduce its debt load to about $3 billion “medium term” from the current $4.3 billion, Chief Executive Officer Julio Friedmann said in an interview. Plans include a bond sale in the first half of this year to refinance some securities.

The improved financial position — with 2022 profit surging to $575 million — comes after Enap’s oil and gas operations in Egypt, Ecuador and Argentina got a boost from high crude prices, while healthy international refining margins benefited plants in Chile. Those trends are expected to extend into this year and next, enabling the company to pre-pay some short-term obligations. About half of the current debt burden matures in the next three years.

“We are going to issue bonds,” the MIT-trained executive said Wednesday from the Aconcagua refinery in central Chile. “We are closely evaluating the local and international markets.”

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At the same time, Friedmann, who took the reins at Enap in November, plans to increase capital expenditure to about $700 million this year from $550 million last year.

The increase comes after underinvestment in the past few years because of Covid restrictions and the heavy debt load. Spending will focus on making treatment processes cleaner and upgrading infrastructure, as well as a more aggressive approach to increasing gas reserves in the far south of the country, he said.

Gas Markets

Enap plans to expand in both liquefied petroleum gas and natural gas markets in Chile, focusing on the wholesale business and eventually selling directly to large-scale consumers such as mines. Organizational changes to enable the expansion will be announced soon. There are no plans to enter the final distribution business, Friedmann said. The company wants to supply more gas to southern cities as a way of replacing dirtier fuels such as wood and diesel.

Enap and its partners are also preparing pipelines and a refinery near Concepcion to start receiving crude from Argentina’s Neuquen basin sometime this year in an arrangement that could supply as much as 30% of its needs.

While there’s plenty of potential do collaborate more with energy-rich Argentina, particularly in the Magallanes area, that would require greater long-term visibility on supplies from the neighboring country, Friedmann said.

He sees a role for Enap in the development of green hydrogen in Chile. It’s in talks with three companies to enable its facilities in Magallanes to be used to receive all the wind turbines, electrolyzers and other equipment that will be needed to make the clean fuel. Enap is also evaluating its own small pilot plants and will consider whether to take up options to enter other green hydrogen projects as an equity partner.

While the company will maintain its focus on meeting rising demand for traditional fuels, it anticipates new regulation that will require lower emissions. It’s also looking closely at clean-fuel options for aviation, Friedmann said.

(Adds clean fuel plans in last paragraph. I previous version corrected spelling of CEO’s surname.)

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