Are you hoping to expand your investment portfolio by adding one of the most profitable opportunities? Real estate investing offers some of the highest return rates in the investment business. Investing in real estate can offer an investor some of the highest return rates, fantastic tax benefits, and low barriers to entry. In this guide, we will explain the most profitable real estate investment deals and how you can make even more money on them by syndicating deals with other real estate investors.
What Types of Real Estate Deals Are the Most Profitable?
Self-Storage Real Estate Investment
Self-storage investments are one of the most profitable investment types that guarantee a high rate of return with very little maintenance or overhead. Self-storage investing can help investors make money in real estate without worrying about expensive repairs, cleaning, or high tenant turnover. The self-storage industry is the fastest-growing sector in commercial real estate and is currently worth $38 billion.
For example, when the economy is booming, people tend to spend more money on household items and furniture to fill their new apartments or homes. When we experience an economic downturn, people might have to downsize, so they will need a place to store all of their extra stuff.
Self-storage rental properties are one of the easiest to maintain since they do not require staff to be present at all times. Many storage buildings are self-serve with a keypad and gate. So, how do you find these great investment opportunities? The best way is to speak with an expert in self-storage investing who will help you find and close the best deals.
Traditional Rental Properties
One way to invest in real estate is to buy traditional investment properties such as single-family homes or apartment complexes. An investment property can be a fantastic investment because current tenants will provide you with a positive cash flow income. Long-term rental properties yield a high return on investment and are, therefore, very popular amongst real estate investors.
Return on investment (ROI) of your properties can be measured using the cap rate or cash on cash calculation metrics. These metrics show an investor how much money they stand to make on their initial investment. You will receive appreciation from a property if you buy low and sell high.
Many times an investment property can be bought for a 20% down payment. Once you have a tenant, the rental income will pay off the mortgage. It can help you build your portfolio and bolster your wealth. As with all real estate investments, you will receive tax benefits for owning the property which will translate into year-on-year savings.
The best place to find traditional rental property investments is to look at neighborhood trends to see if a property would be a good investment. You can also look into investing in a real estate investment trust, which we will discuss further when we talk about syndicating real estate deals.
Commercial Real Estate Investments
Commercial real estate includes large office buildings, retail spaces, and malls. So, it offers investors a chance to accommodate long-term tenants with limited business hours.
The main reason commercial real estate is such a great investment is because most businesses operate for about 8 hours a day. In the remaining hours, the building is empty, so there is less foot traffic and wear and tear on the building. Most businesses tend to lease for long periods; decreasing the tenant turnover rate for the investor.
Commercial real estate properties are also a great way for investors to build business relationships with professionals who rent office space. Most relationships will be professional and courteous and might lead to you doing business.
A company will be more likely to maintain their storefront or office space since they might be seeing clients there. For example, a retail store will maintain a clean storefront to welcome customers.
Short-Term Rental Properties
With the advent of Airbnb, short-term rentals have become more popular and easily accessible to investors. Vacation rentals offer investors a chance for higher rental income potential since most of these properties have a high season. In season, this type of investment is more profitable than long-term rentals.
You can adjust for fluctuating market rates during the low and high season between short-term tenants. As a vacation property owner, you will have more flexibility for you and your family to use the property whenever you want.
Another reason these properties are a good investment is there is generally less wear and tear. Short-term tenants will likely only stay for a few days to a few weeks at the most. They are simply visiting guests, so they will not want to make renovations. So, maintaining the property to a high standard is key.
The best way to find these types of rentals is by searching in popular vacation areas. You should also pull up previous sales records to determine what might be the typical going rate for vacation properties in that area. Now is a great time to invest in a vacation property because prices have dropped in the past couple of years.
While this type of real estate investing can be quite a lot of work, it can also result in huge profits and rewards for investors. House flipping is when an investor buys a property and renovates it and resells it for more than they paid for it.
Another benefit is this type of property can yield a quicker return since you will not have to hold the property and find tenants while you wait for appreciation. An investor can potentially hire a team to complete the renovations in under a month and then resell the property for profit.
Flipping houses can also be a rewarding experience when you see all of your hard work pay off. If an investor chooses to do some of the work themselves, the results can be rewarding. It will also release capital to make other real estate investment decisions in the future.
If you do your research, you could potentially buy houses that are in financial distress for much less than the market value. The best way to find these deals is to check out foreclosures in the region that you want to buy.
How To Syndicate Real Estate Investment Deals?
Now that you understand the best types of real estate investments and where to find them, let’s discuss how to invest in real estate and syndicate deals for even greater reward. Real estate syndication can be similar to crowdfunding or real estate investment trusts (REITs). It is when multiple investors pool their funds together to acquire a property. You can become a syndicator, which means finding the deal yourself, or you can become part of a real estate syndicate. So, how does real estate investment syndication work? Keep reading to discover our steps to syndicating a real estate deal to share the investment with others.
Research a Housing Market
The first step is to research a housing market in which you want to invest. You should decide whether you are interested in purchasing a single-family home, apartment building, or commercial real estate. Research the areas where you want to buy by pulling sales records to see how much other properties have sold for. You can use some online tools for determining cash on cash return and cap rates. We recommend analyzing the neighborhood before choosing your options.
Analyze All of Your Options
Once you find an area that is primed for investment, you should choose some of the properties for sale and analyze them. You can do this by running analytics to find out what the potential return might be for each property. The main goal should be to find positive cash flow properties that will generate a high ROI.
Prepare for the Home Inspection
After you pick your property, you should prepare for the home inspection. This is a crucial element in the syndication strategy. It will give you a better picture of the property and if it will need repairs soon. The key factors to look for in a home inspection are the roof, plumbing, foundation, and heating and air conditioning system. If all of these items check out, then you can move onto the next step.
Make the Deal
At this step, if everything checks out in your favor with the home inspection, you should make an offer and deal with the seller. This will ensure the seller cannot pull out or make a deal with another buyer. This ensures that the seller is serious and not intending to sell the property out from under you.
Speak to an Expert
It is always wise to ask an expert for advice when working with commercial real estate and other real estate investors on a syndication deal. You should enlist the help of a good real estate lawyer to help with due diligence and structuring the deal.
Now that you have the deal structured, you need to look for like-minded money-makers to invest in the property with you. You must choose your partners wisely. You should make sure they have similar ideas and work ethic. You can network with people who are interested in real estate investing by checking out real estate clubs or speaking with agents who can put you in touch with other investors. You might also be able to check real estate syndication websites.
Close the Deal
Now it is time for the fun part. You and your investors can close the deal and start receiving positive cash flow and dividends from your investment. An attorney can walk you through the due diligence and closing process to make sure your interests are protected.
In this guide, we armed you with the necessary information to syndicate your first real estate deal, whether you want to invest in a fixer-upper or real estate investment properties. We also helped narrow down the best real estate investments that, when chosen wisely, are sure to result in a high rate of return. So, now, you’re almost ready to invest the right way to generate consistent passive income. Submit your Application to be an Investor with us, and get started today.