During and immediately after the pandemic, real estate mania swept the country. Housing prices went sky-high, and not just in large cities like New York. Every state seemed to see the same rise in interest. As supply fell and demand blossomed, tons of property owners felt like they were sitting on goldmines. How could they feel otherwise when even the smallest and oldest of homes were selling for big bucks?
Of course, nothing lasts forever. And that includes a real estate market that’s a seller’s paradise. In 2023, real estate prices have normalized and buyers are once again able to be more selective. However, just because housing isn’t as red-hot as it was doesn’t mean there aren’t investment opportunities. If you’re willing to be a little creative, you’ll find many innovative ways to make your money work harder with real estate.
Below are suggestions that will help you enter into real estate. Don’t have access to much cash? No problem. You’ll discover that a few of these recommendations require little to no financial contribution.
1. Invest in a co-owned vacation property.
Co-ownership as a means to purchase property isn’t a new concept. Nevertheless, it can be tough to find trustworthy partners. Plus, plenty of co-ownership arrangements are complicated to navigate. Unless you’re a seasoned real estate investor, you might feel a little overwhelmed.
If co-ownership sounds complicated, lean into new technologies. For example, Plum CoOwnership makes it simple to either start a co-ownership arrangement with friends or other investors. Plum has a group matchmaking process and they walk you through the buying process, while providing a centralized repository for all your documents. These include all financials and house rules. Plus, you can leave your contract and just sell your share effortlessly to someone else.
It’s hard to overlook the investing pros of co-owning a percentage of a vacation home. You actually have ownership of the property vs. a timeshare or rental, where you “share time” without ownership. Plus, co-ownership comes with added flexibility. You have the option to rent out any of “your” days to travelers, or you can even sell your share later. You can also minimize the impact of both predictable and unexpected maintenance bills.
2. Consider a rent-to-own arrangement.
Like co-ownership, this isn’t a new concept. Nevertheless, it’s gaining favor, especially with Gen Z and Millennials aspiring toward home ownership.
According to Javelin Strategy & Research, 55% of Gen Z are open to rent-to-own setups. That’s because it’s hard for a lot of younger consumers to become first-time homebuyers. Nearly one-fifth of all Millennials say they had financial problems that kept them from purchasing a home recently. For those without families able to help them cover a down payment, rent-to-own just seems like a good choice.
Unfamiliar with how a rent-to-own exchange works from an investment perspective? Basically, you as the investor could rent a property from the seller. The understanding is that at the end of a prescribed rental period, you would be able to own the home. At that point, you could do anything you wanted with the home, including putting it on the market.
If you already have a property to sell that’s not moving, you could offer it through a rent-to-own contract. You might have a simpler time getting buyers. Though you’d have to play landlord for a while, you’d have a better chance at selling it for a specific price.
3. Purchase a multifamily property—and live there.
Forget about all that growth hacking. It’s time to do some house hacking. This real estate investing process involves finding and purchasing a multifamily property. You wouldn’t rent out all the rooms, though. On the contrary, you’d live in at least one part of the home.
For example, say you found a duplex you could afford. You’d move into half the house and find a trustworthy tenant for the other half. The monthly rent would cover many of your expenses, allowing you to reduce your out-of-pocket expenses. Who wouldn’t like to be assured of lowered (or paid) utility bills, mortgage payments, etc.?
Don’t be afraid to set an aggressive timeframe for your mortgage if you go this “passive income” route. Though the 30-year mortgage is common, you can find 10-year, 15-year, and 20-year alternatives. With someone else’s rent covering the bulk of your mortgage, you might be able to own your property faster.
You won’t be locked into living in your multifamily unit forever, either. By saving and investing your money diligently, you can one day move on. At that point, you might want to just keep the rental to pass down to other family members.
4. Get into the Airbnb and couch surfing game.
It seems like Airbnb has been around “forever”. There’s a reason for this phenomenon: The idea of democratizing vacation property rentals completely changed the hospitality and tourism landscape. Airbnb, VRBO, and other sites have also made it possible for you to sell your space for a premium.
Even if all you have is a room with a dedicated bathroom, you have the start for some serious couch surfing. It’s a bonus to you if you’re located in a popular city. However, you may be able to find some short-term renters if you’re off the beaten path.
For instance, Furnished Finder offers rooms and suites to traveling medical professionals. If you’re near a healthcare facility, you could earn extra money by renting your guest bedroom and bath to doctors and nurses. As a property owner, you’d just need to become verified. Once you are, you could experience regular room rental income. Since the average medical traveling tenant stays 92 days, you could have as few as four new guests annually.
The only downside to this real estate investing hack is having a stranger in your home. Still, it may not be hard to get accustomed to becoming a landlord.
5. Become a real estate “bird dog.”
In the hunting world, bird dogs are critical to the success of the hunters they serve. Bird dogs are tasked with pointing out prey, after all. As a real estate “bird dog”, you can be just as important.
Real estate bird dogs act as funnels to other real estate investors, such as wholesalers. Bird dogs look for distressed or undervalued properties that investors might like to know about. They then share those properties with the investors and receive payment if the investor buys the property.
The good thing about bird dogging is that you can do it on a part-time basis as a side gig. The not-so-good thing? You may find it hard to get started. Unless you already know some hungry real estate investors, you’ll have to build your own network. That’s certainly not impossible, but it will take some time.
There is a workaround you should know about: The app store. Some bird dogging apps are available. Bird Dog Express™ is a notable one. With Bird Dog Express, you need very little in terms of resources or knowledge to get started. As long as you have a smartphone, you can fetch yourself some investment dollars via bird dogging.
6. Become a power flipper.
It’s hard to turn on HGTV without seeing a reality show featuring house flippers. Although TV makes it look like flipping is a piece of cake, it does require patience and expertise. Surrounding yourself with people who know how to make fixer-uppers shine is the key to making flips profitable.
A smart strategy to begin flipping is to talk to other flippers. You’ll often find them at home real estate auctions. Talk with them and see if you can get a feel for what flipping is like. The more you know prior to making your first bid attempt, the better.
With that being said, flipping can pay off. You can even live in your flip while you systematically upgrade all its rooms and landscaping. As long as it’s habitable, you won’t feel uncomfortable. Hey, you’re only staying there a little while.
Just make sure that you keep good records of the real and hidden costs of each flip. You need to know how much you’re actually making to decide whether flipping is the right option for you.
7. Pave your way to financial freedom with a parking lot purchase.
Do you consider yourself very imaginative? You’ll like this last real estate investment tip: Buy a parking lot. People will pay premium amounts to be able to park in busy areas and cities. In fact, you’ve probably done it yourself.
If you can’t find a parking lot, check out distressed properties that could be razed and then paved over. Razing a building can be pricey, but usually smaller distressed properties with decent-sized footprints sell for very little. You just need to do some math and figure out how quickly you can begin turning a profit.
Of course, you’re going to need a parking lot attendant, insurance, etc., to own and operate your new facility. You’ll want to market it, too. Nevertheless, you might be shocked at how fast you get your investment dollars back.
Real estate has been and always will be a lucrative investment vehicle. No matter what happens with the market, 2023 could be your year to invest.
Related: [How the Current Real Estate Market Can Affect Your Finances]