If you’re planning on investing in some property, that’s great!
Real estate is one of the safer investment opportunities out there.
But have you thought about what strategy you’re planning on using?
If you haven’t, you probably should, because there are so many different ways you can go about investing.
Most fall into two categories:
Long term and short term.
Both categories have some really good strategies, but which one is right for you depends on what you are looking for (safer investment, liquid cash flow, etc.) and how much resources you have (capital, time, energy).
Here are some pros and cons of long term and short term investment strategies that can help with your decision.
Typically with long term strategies, you are either renting the property and/or taking advantage of appreciation.
With appreciation, after purchasing the property, all you really have to do is sit back and wait until you are ready to sell.
As for renting, you can hand control to a property management service and let them take care of most of the work.
An inflation hedge is an investment that is supposed to protect the investor against a currency’s decreased purchasing power.
Currency loses value due to things like inflation.
Real estate is a good hedge against inflation because as inflation rises, so does the property’s value and how much you can charge for rent.
This means that long term investments are typical pretty safe.
Since you are often relying on appreciation, long term strategies will last several years.
If you don’t have the patience or are looking to make money quicker, then long term probably isn’t for you.
Once you purchase the property, you don’t have much control over its value.
Because while real estate is, for the most part, a safe investment, there is always a chance your property could depreciate and lose value, which is something you have zero control over.
If you’re looking for a more hands-on approach, then you may want to look at short term strategies.
There is a reason they are called short term strategies. You will get a return on investment quickly.
Less than a year if you do it right.
This is the type of strategy for you if you want quick cash.
One of the more popular short term strategies is the fix and flip. This is where you purchase a property, fix it up, then sell it for a higher price as quickly as possible.
So with this, you have a lot more control over the outcome, and the more effort you put into fixing the property and finding a buyer, the more you can make.
Short term strategies carry more risk than long term ones.
This is because you are trying to re-sell the property as soon as possible, as it costs money to hold into the property. So, if you don’t find a buyer quick enough, then you could lose money.
There are also sometimes unexpected costs that could arise (like unseen problems with the property), or fixing the property could cost more than expected.
Again, because of the “as quick as possible” nature of the short term strategy, you are likely to get more stressed out.
It will also take a lot more effort, which isn’t necessarily a bad thing, but if you were looking to let your money do the work for you, then you may not want to use short term strategies.
Hopefully, this article has helped you narrow down your choices!
If you need help picking the right strategy for you, then check out this article by Pearl Lemon Properties.
It goes into more depth on specific strategies you can use!