Real Estate Investing Strategies – without Buying, Flipping or Renting
What is real estate investing? There are some big misconceptions when it comes to what is exactly real estate investing. Buying, renting or flipping are not the only true real estate investing strategies to make money in real estate.
As John D. Rockefeller once stated, “Own nothing, but control everything.”
In this article we are going to talk about strategies where you can invest in real estate without buying, flipping or renting, and also I will mention what asset protection entails, in case you want to “control” real estate for the long term (for generational or legacy wealth,) but don’t actually “own” it for liability risks and taxes.
1. Wholesaling – wholesaling is a real estate investing strategy that has gained a lot of popularity, but also a lot of controversy, over the last few years. It is also a relatively new term. Back in the ‘90s or earlier it was called more appropriately “flipping the contract.” You are technically flipping a contract, not the property.
Wholesaling is a great way to make money from flipping contracts, by controlling the transaction as an “owner per contract” with equitable interest.
2. Options – lease options, master lease options and wholesaling lease options are also great ways to exercise your control on a property by offering an option agreement to the seller. With an option, you propose to the seller the opportunity to buy at a future date, once the terms of the option are satisfied. It’s a “soft” claim on a property via an executed contract, which does not force you to go through with the purchase, but lets you control the transaction.
Options also allow you to rent out the property (via sandwich lease options) or wholesale the option.
3. Contract for Deed – it is also called an “installment land contract.” This instrument works in a way like options. You basically enter into a contract with the seller that you will buy or sell the property in the future. Again, you control the property without really owning it.
Contracts for Deed and Lease Options in a way work very similar, but contracts for deed feel more like a sale to the seller and therefore give a certain level of reassurance that the property is going to be taken off their hands in the near future (either by a straight purchase from the investor or a resale.)
4. REITs – a REIT is a company that makes investments in income-producing real estate properties. Investors buy shares of a REIT and in turn, the REIT investment fund manager(s) uses that capital to make investments on behalf of its investors.
REIT investments allow investors to earn money from the income produced by real properties without requiring investors to own properties.
Several REITs accept a low investment commitment ($500 or less,) which makes it very appealing even for new investors with little available funds.
5. Real Estate Syndication – a real estate syndication is a private company — typically structured as a partnership — that invests in real estate. The purpose of the partnership can range from buying properties to rehab (fix and flip,) to buying rentals, new construction and commercial properties investing. Profits are distributed through a waterfall structure with investors — the limited partners or nonvoting members of an LLC — receiving a preferred return.
The partnership establishes the minimum investment required to participate in the syndication model.
As you can see, there are various ways to invest in real estate without flipping or being a landlord. They vary from very little investor’s involvement (wholesaling, options and contracts for deed) to completely hands off (REITs and real estate syndication.)