Thinking about investing? Go for it! There is an investment strategy for everyone. The most successful real estate investors don’t focus on the asking price, potential appreciation, or how much money they might make. Instead, they begin the search for their next acquisition by asking a very basic question.
“Does the amount of risk and potential reward of this opportunity match my investment strategy?”
When it comes to investing in single or multi-family real estate, there are 3 main strategies investors utilize.
- Core Investing – Core investing involves investing in Class A properties. Class A properties are properties that are nearly brand new, located in five-star neighborhoods, with up-to-date amenities. Because of this, these properties are perceived as “low-risk” investments. However, the prices are much higher.
- Opportunistic Investing – This method of investing typically involves the “fix-n-flip” process. A lot of time, money, and effort is expended to buy low with the intent to sell high. Because the real estate market continually moves up and down, it forces investors to time the market. Risk is higher using this method due to the unpredictable real estate market.
- Value Add Investing – The Value Add strategy is designed for rental property investors focusing in on Class B and Class C single or multi-family properties. When used correctly, the “Value Add” strategy offers higher returns with a manageable level of risk. This strategy balances out the rewards and risk factors associated with Core and Opportunistic Investing.
The key to using any investment strategy is ensuring it aligns with your investment goals. In today’s market, the Value Add is popular. According to GlobeSt.com, “the demand for single-family rentals continues to jump. According to the article, “. . .demand for single-family portfolios, defined as five or more homes, has skyrocketed in the last month, up 650%.” This is music to the single or multi-family investor’s ears.
SOURCE: Roofstock Blog | Written By: Jeff Rohde | Published: 07/13/2021
Is Value Add Real Estate The Right Strategy For You?
SOURCE: By Kelsi Maree Borland | April 29, 2020
Demand Jumps in Single-Family Rental Market