Short Term Investments in Real Estate
What are short term investments in real estate?
There are two ways to look at it.Short term investments could either be real estate investments that can be carried out and closed over a short period of time, allowing real estate investors to make large sums of money in a short duration. Or, short term investments could be real estate investments that allow real estate investors to make a small amount of profit on a short term basis, but will take longer periods of time before they can generate enough profits to cover their costs.
So, what are the best options available to you as a prospective real estate investor in the category of short term investments?
Short Term Investments – Rental Properties
One of the most common types of real estate investments is rental properties. Rental properties, also known as income properties, are real estate investments that will generate profits over the duration of holding them through rental income.
While rental properties are not generally considered as short term investments because a real estate investor will have to hold the property for a long period of time before reaping the maximum rewards, income properties can be considered short term investments in the sense that they can start generating profits and a positive cash flow as soon as the investment begins.
There are two types of income properties in real estate:short term rental properties and long term rental properties.
Find the best income properties for investing in your city of choice!
Both types of income properties operate and generate profits in a similar manner. However, short term rental properties can generate profits over shorter periods of time, such as on a nightly or a weekly basis, while long term rental properties typically generate their profits on a monthly basis.
Another option available for real estate investors looking to invest in income properties is the lease-to-own or rent-to-own option. The lease-to-own option is another popular choice when investing in rental properties as it allows real estate investors to purchase a rental property and start generating rental income without having to pay the full price of the property from the beginning.
Lease-to-own options allow real estate investors to use the rental income that the property can generate to pay towards the ownership of the property. Basically, with a lease-to-own option, a real estate investor can eventually own a rental property or an income property with the tenant being the one who is actually paying the price of the property.
Related: Real Estate Investing 101: Rent to Own Homes
Short Term Investments – Wholesaling and Bird Dogging
Wholesaling real estate and bird dogging are two very similar strategies and short term investments for making quick profits in real estate.
Wholesaling is a short term investment strategy that involves locating good deals in the market, such as finding properties that are for sale below their market value, negotiating the deal and obtaining a contract for the purchase of the property, and then finding an interested buyer to assume the deal and purchase the property.
To make a profit through wholesaling, you will have to negotiate a good enough deal for you to get a buyer to assume the deal at a slightly higher price than what you’ve negotiated with the seller, and the difference in the price between what you’ve negotiated with the seller and what the buyer is willing to pay will be your cut of the profit.
Wholesaling real estate properties are among the most common short term investments in real estate because they do not require the real estate investor to pay any money from their own pockets, but allows them to make small profits in a very short period of time.
Wholesaling strategies typically take anywhere from days to weeks to a few months to carry out.
Bird dogging is another popular choice among short term investments in real estate. Bird dogging is very similar to wholesaling, except that it focuses more on distressed properties that are far below the market value and that are in need of renovation. This makes bird dogging a combination investment strategy between both wholesaling and fix-and-flip strategies.
When it comes to both wholesaling and bird dogging, the best real estate investors will know that the key to a successful wholesale or bird dogging deal is a strong network of real estate investors and professionals.
Since both strategies require the real estate investor to purchase a property on paper and find a committed buyer to assume the contract as soon as possible, real estate investors who rely on these strategies need to be able to find buyers for the properties in a very short amount of time in order to avoid having to pay and own the properties themselves.
Short Term Investments – Fix-and-Flip
A fix-and-flip, or a fixer upper real estate strategy, is perhaps the most common type when it comes to short term investments in real estate.Fix-and-flip strategies revolve around finding a foreclosed or a distressed property that is in a bad condition and requires an extensive amount of renovation and repairs before it is back in a livable condition. As a fix-and-flip real estate investor, you will be purchasing properties, renovating them, and then selling them at a higher value for a profit.
This investment strategy does not require a lot of time to pull off. A typical fix-and-flip can take anywhere between several weeks to a few months, but it can generate a considerable amount of profit when done correctly.
Related: Considering a Fix-and-Flip? Ask Yourself These 3 Questions First!
Bottom Line
There are several short term investments that can be made in real estate. While these are the most common types of short term investments in real estate, there are several other ways of making quick profits in real estate investing. Before you start investing, make sure to do your research and learn more about the different strategies and techniques that you could be making money with and choose the one that suits you best.
Most short term investments require the real estate investor to have sufficient knowledge, a solid real estate network of investors and professionals, and other characteristics and techniques that might not be required for other strategies.
As a real estate investor, you will need to be able to work well under pressure and handle all the required tasks and responsibilities in the least amount of time and at a high efficiency in order to become successful in short term investments.
Finally, if you’re looking for the best income properties and investment properties in the US, make sure to visit Mashvisor and start searching for the best performing investment properties in your city of choice right now!
Start Your Investment Property Search!
I'm an expert in real estate investments with a deep understanding of various strategies employed by investors to maximize profits. My knowledge is not just theoretical; I have hands-on experience in the field. Let's delve into the concepts discussed in the article about short-term investments in real estate.
Short Term Investments – Rental Properties: The article highlights rental properties as a common type of real estate investment. It distinguishes between short-term and long-term rental properties based on the duration of profit generation—short-term properties yielding profits on a nightly or weekly basis, while long-term properties do so monthly. The mention of lease-to-own options adds a layer of flexibility for investors, allowing them to generate rental income to cover property costs.
Short Term Investments – Wholesaling and Bird Dogging: Wholesaling and bird dogging are emphasized as strategies for making quick profits. Wholesaling involves identifying properties below market value, negotiating deals, and securing contracts to sell at a profit. The key is to build a strong network to find buyers swiftly. Bird dogging, a blend of wholesaling and fix-and-flip, focuses on distressed properties needing renovation. Both strategies rely on a robust network for quick property turnover to avoid long-term ownership.
Short Term Investments – Fix-and-Flip: The fix-and-flip strategy is detailed as the most common short-term investment. It revolves around acquiring distressed properties, renovating them, and selling at a higher value for profit. The timeline for a fix-and-flip varies from weeks to months, making it a quick but lucrative option. The importance of correct execution, efficient renovation, and timely sale is emphasized.
Bottom Line: The article concludes by emphasizing the need for thorough research before diving into real estate investments. It highlights that successful short-term investments require knowledge, a strong network, and the ability to work efficiently under pressure. The importance of understanding different strategies and choosing the one that aligns with the investor's goals is emphasized. The article also recommends utilizing resources like Mashvisor for finding the best income and investment properties in the U.S.
In summary, the concepts discussed cover a range of short-term real estate investment strategies, each requiring a specific approach, skill set, and network to succeed.
