The Best Real Estate Investing Strategies in 2023

We use affiliate links and may collect a share of sales or other types of compensation from the links on this page if you decide to shop and buy from them. However, we would never recommend products that we wouldn’t use ourselves.

Real estate remains one of the best ways you can build wealth and generate passive and predictable revenue each month. In fact, real estate is one of the oldest investments throughout human history. Landowners in the Middle Ages built civilizations on their land and used their real estate to accumulate large amounts of wealth.

While the days of the Middle Ages are long gone, it’s still possible to build wealth using one of several real estate investing strategies that we’re going to go over. All the strategies have been proven to work with many other investors. Even better, there are so many other free resources on all these real estate investing strategies that you can use to get started as a real estate investor this year.

Continue reading to find out the best real estate investing strategies, their pros and cons, and which one you should get started with today as a new real estate investor.

Types of real estate investment strategies

Beginners should have an idea of what real estate investing is and the different types of real estate investments available today.

Real estate investments are considered either residential or commercial real estate. Residential properties are homes between one and four units, while commercial properties include apartment complexes over four units as well as office buildings, hotels, shopping malls, and much more. 

Commercial real estate investing typically has higher returns than residential real estate due to the fact that commercial buildings are worth more and sell for more money than single-family homes and multi-family dwellings. However, residential real estate tends to be the best option for beginners since it doesn’t require high upfront costs and still generates stable returns throughout economic cycles. 

How much can you make with real estate investing?

Real estate investing is so attractive because there is no ceiling on how much you can make. Residential real estate investors can acquire as many rental properties as they want which generates consistent monthly income. 

Real estate investing can scale very easily and has the ability for investors to automate their business with property managers and other key people in the real estate investing process. 

On average, full-time real estate investors tend to make over $100,000 per year. For example, average real estate investors in Pennsylvania make about $117,000 per year with their entire investment portfolio.

The earning potential for commercial real estate investors is even higher. Some commercial buildings are worth hundreds of millions of dollars and development companies routinely sell big commercial buildings.

The bottom line is that there is plenty of opportunity in all types of real estate. However, most new investors get started with one of the following real estate investing strategies.

Owner-occupied housing

In simple terms, an owner-occupied property is a home that the owner lives in. This is in contrast to an investment property where the owner is not living at the property as their primary residence.

Owner-occupied properties are usually mentioned in relation to multi-family properties that the owner purchases and rents out additional units to tenants. This helps the homeowner pay their mortgage payment or exceed it to generate positive cash flow each month. 

Owner-occupied properties may also be referred to as “house hacking.” The reason for this is that it’s the best way to get started as a new real estate investor since you’re “hacking” your way into getting started real estate investing.

Benefits of owner-occupied properties

There are many benefits to owner-occupied arrangements, including:

• Easy way to get started with real estate investing. Owner-occupants can still qualify for FHA and conventional mortgages without a 20 percent down payment requirement. Most owner-occupants try to acquire loans with a low down payment since they plan on using the home as an investment property or selling it in the future.

• Potential for positive cash flow. Depending on your area and average rent prices, you may be able to generate positive cash flow that gives you profit each month for being an owner-occupant. In turn, owner occupancy can reduce or eliminate your entire mortgage payment where you’re actually making money through your rental.

• Future investment property. After 1 year of living at the property with an FHA loan, you can rent out your owner-occupied home as a sole investment property and aren’t required to live there. Lots of real estate investors rinse and repeat this process and then, after a few short years, you’ll have several investment properties in your portfolio that all generate consistent monthly income from the rentals.

Drawbacks of owner-occupied properties

• Requires active management. As with any rental, you’ll be required to manage your properties and may serve an active role in making upgrades to the property and dealing with maintenance issues. For those that want passive income, you’ll have to look elsewhere as house hacking requires active management.

• Can get expensive with a property manager. If you want to eventually automate your real estate investments and scale your business, you’ll need to hire property managers who manage the day-to-day operations and deal with most of the issues your tenants face. With this system, you can focus on getting more deals and growing your portfolio but still need to fairly compensate your property managers.

• Requires an upfront investment. While house hacking is one of the best ways to get started real estate investing, there is still an upfront investment of several thousand dollars if you want to buy a home with a 3 percent down payment (which is the lowest for most loan programs in the U.S.)

Fix and flips

The next type of real estate investing strategy we’re going to discuss is the classic fix and flip. This is when the home buyer purchases a distressed home with the intention to fix its issues and upgrading areas of the home like the kitchen, bedrooms, and bathrooms. 

Fix and flips are becoming more popular due to TV networks like HGTV following professional house flippers around to see how they manage their fix and flip properties. 

Benefits of fix and flips:

• Potential for high returns. Fix and flip properties allow some investors to make a lot of money off their investments. If you can spot a distressed property with the potential for a fix and flip, you can easily generate big returns. As you get more experience as a flipper, you can move on to bigger properties and even commercial buildings.

• Getting started as an entrepreneur. Many people want to be entrepreneurs and work for themselves but never seem to make that dream come to fruition. Being a real estate investor is one of the best ways to start a business and learn how to be an entrepreneur. As you do more fix and flips, you can eventually replace your full-time job and be a full-time real estate investor.

• Unleashing your creativity. Fixing up and flipping homes allows your creativity to shine. You’ll be picking out paint colors, appliances, fixtures, and many other customizations that can be extremely rewarding and profitable once the home is complete.

• A new family project. Real estate investing with fix and flips can be a great way to take on a new project with your spouse or family. There is always plenty of work needed to be done, and making it a fun activity for everyone can be a rewarding experience for investors.

Drawbacks of fix and flips

While fix and flips offer plenty of upside, there are some significant drawbacks that you should consider before starting a fix-and-flip investment.

• Fix and flips tend to be riskier investments than other real estate investing strategies. These investments require a large upfront investment to purchase the distressed property and involve the risk of loss.

• You may not be able to get a traditional mortgage. Most lenders don’t issue traditional mortgages to flippers since there is so much risk involved. You’ll need to come up with the money yourself or look at bridge loans or hard money loans to finance your fix and flip property.

• You must work with many different people. Unless you plan on making all the upgrades yourself, you’ll need to work with one or more contractors for important utilities like electrical work, kitchen remodeling, and flooring. This means you need to manage many different parts of the process which may make it difficult to deal with multiple contractors.

• Contractors may be unreliable. Some contractors aren’t always the best people to work with. They often want to get paid before work is complete or even if the work is sub-par. Once they finish your job they are onto the next one and may not answer your calls if you need them to come back and finish the work they started.

Fix and flips can be great investments and a fun project for you and your family. However, these investments come with risks that could cost you hundreds of thousands of dollars if your fix and flip doesn’t go as planned. We recommend working with people who have experience with fix and flips before you decide to buy your first property.

BRRRR strategy

The BRRRR strategy (pronounced “burr”) stands for buy, rehab, rent, refinance, and repeat. This real estate investing strategy is similar to fix and flips since you’re targeting distressed properties once again. However, the BRRRR strategy focuses on long-term rentals instead of flipping the home for a quick profit.

The BRRRR strategy also involves refinancing the property with a cash-out refinance. Investors then use the extra money to buy additional properties with the BRRRR strategy and can quickly accumulate several rental properties and start to scale their real estate investing business.

Learning how to find BRRRR properties can be difficult. However, those that can spot a good deal stand to make a lot of money with the BRRRR strategy. 

Below are some additional benefits from the BRRRR strategy:

• Passive income. Much like an owner occupied arrangement, the BRRRR strategy makes it possible for real estate investors to generate passive rental income that consistently produces monthly returns. 

• Building your rental portfolio. Owning properties and renting them out with the BRRRR strategy allows you to build a rental portfolio and significantly increase your net worth through real estate investing.

• Stable long term investment. Rental property investing is one of the safest investments you can make as a real estate investor. The demand for affordable housing is constantly increasing and you can expect that it will continue to increase in the foreseeable future.

Cons of the BRRRR strategy

• Lots of risk involved. Any investment targeting distressed proeprties involves a lot of risk since there can be unforeseen issues with the property and setbacks in the rehabilitation process. BRRRR investors should have enough reserves to withstand a financial loss.

• High interest rates may make it difficult to refinance. Since the BRRRR strategy involves refinancing the property after it’s rehabbed, you’ll need to consider where interest rates are and if it still makes sense to refinance.

• Finding and managing your tenants. Since you’re renting the property out, you’ll need to spend time finding and screening tenants to make sure they are a good fit. You’ll need to manage your tenants to ensure they are happy with their living situation and want to continue to live at your property.

Buy the BRRRR Investing Book on Amazon

Commercial real estate

While investing in residential real estate tends to be the logical choice for most beginner investors, there are some opportunities in commercial real estate that you may want to consider.

Commercial real estate investing

Some of the most common commercial real estate buildings include offices, hotels, shopping malls, apartment complexes, and health centers. These are traditional commercial buildings that require a substantial upfront investment, and most of these are handled by large investment groups as opposed to individual investors.

Benefits of commercial real estate investing

• High returns. Expensive commercial buildings are worth more money and generate bigger returns than smaller residential properties. Buying and selling commercial buildings is a great way to accumulate a lot of wealth through real estate.

• High cash flow. Renting commercial buildings to tenants generates cash flow that investors are looking for. High cash-flowing properties can sell for more money and lead to bigger payoffs for investors.

• Tax benefits. There are plenty of tax benefits that come with investing in commercial real estate. Depending on how well your investment performs, you can use some of your losses and expenses as tax write-offs to reduce your taxable income and save money when it comes time to do taxes.

Cons of commercial real estate investing

While commercial real estate has the potential for big payoffs, the drawbacks of this lucrative investment strategy is typically enough to make most beginners think twice.

• Extremely high upfront costs. Commercial real estate investing requires large upfront capital to finance the costs of the property. Most commercial real estate buildings are bought and sold by a group of investors, making getting started in commercial real estate investing very difficult for a beginner.

• High expenses. Managing a commercial property requires a lot of money to pay workers, maintain the buildings, and just to keep the lights on. You’ll need to have plenty of working capital if you want to be able to manage and maintain an investment property.

• Too much risk as a beginner. Even if you have the upfront capital to invest in commercial real estate as a beginner, there is often too much risk for a single investor to manage a commercial building. 

Mobile home park investing

One alternative method of real estate investing is investing in mobile home parks. While you may think of mobile home parks as a neighborhood of low-quality tenants, this real estate investing strategy is one of the best ways to acquire cash flowing properties.

In fact, mobile home tenants tend to be some of the most stable tenants who stay in their homes long-term. While the rents tend to be lower in mobile home parks, having 80+ doors of rental income in a single mobile home park can bring in lots of passive income.

Investors like Brandon Turner are leading the way in the mobile home park investing space. He makes over $1.5 million in rental income from his portfolio of mobile home park investments.

Benefits of mobile home park investing

• Stable long-term tenants

• High cash-flowing properties

• Less competition

• Easily scalable

• Potential for automation

Drawbacks of mobile home park investing

• Not as much profit per unit

• High upfront investment

• May be difficult managing an entire mobile home park as a beginner

REITs

Real estate investment trusts (REITs) are the last way that you can get started investing in real estate as a beginner. This real estate investing strategy involves investing in a fund that often functions much like a stock. 

REITs contain many different commercial real estate investments and the value of the fund can fluctuate. This is one of the best real estate investing strategies for beginners since you don’t need a large upfront investment to get started.

However, REITs often provide lower returns than other investing strategies and require a long-term time horizon to see substantial returns investing in a REIT.

Find out more about how to invest in REITs as a new real estate investor today.

Final thoughts

The goal of this article was to educate you on all the different real estate investing strategies you can use to get started investing in real estate this year. We highly recommend starting with one of the residential real estate investing strategies like house hacking or the BRRRR strategy.

These investments don’t require as much upfront capital and are great options for beginners. You’ll get your feet wet managing a single rental property before you move on to bigger and better projects down the line.

Are you thinking of becoming a first-time homebuyer? Check out some of the best tips for first-time homebuyers looking to get involved with home ownership today.

Interested in learning more about partnering with us to grow your business? Contact us today to find out how to advertise with us and grow your business organically with the power of SEO.