But how do you decide which strategy is right for you? Ask yourself, “What is my goal?” Do you intend to cover all of your monthly expenses from rental income? Would you like to build equity in your properties? Are you planning to flip homes?
The best way to assess where you stand vs. where you want to be is by calculating your Freedom Number. Download our free PDF to find how many rental properties you would need to reach financial freedom.
When you’re choosing which way to make money, you should know that there are no right or wrong answers. The best method for you is the one that best aligns with your goals.
Without further ado, here are the three strategies for investing in real estate:
1) Cash flow. This strategy brings in passive income every single month by renting out your property to tenants. This is my favorite strategy, and the basis of my buy and hold business. The best way to create consistent cash flow every month is by purchasing properties that produce a high return on investment.
2) Equity. Building equity in a property can be a great way to make money, but it’s not as instantaneous as it used to be. Before the market collapse, people would buy properties and quickly sell them for a huge profit! This strategy was possible because of the faulty pricing system. That’s no longer the case, but you can still grow equity on a property. If you’re building equity on your investments, make sure you’re leveraging it through accessing HELOCs or cash out refinances.
3) Appreciation. Appreciation is also not as big of a game as it used to be. In fact, it’s no longer a solitary investment vehicle. I like to think of it as icing on the cake. Appreciation can help you make money, but don’t let it be the only reason you purchase a property. If one of your properties appreciates, leverage it! If you’re playing the appreciation game for the mere satisfaction of watching numbers rise, there’s no point.