Real estate investing can seem risky, especially during times of economic crisis, but there is a solution. The way to minimize timeframes and maximize profits thus reducing risks is to opt for short-term real estate investments.
What Is a Short-Term Investment?
First, let’s see what a short-term investment strategy is. The answer is in the name. A strategy that lasts from 1 to 5 years and can easily be converted into cash is considered a short-term investment. In practice, many short-term real estate investments can take as little as 3-12 months to bring significant results. This is in direct contrast to the long-term strategy which can take up to 30 years or even more. Of course, nothing is black and white, and long-term strategies have their own advantages.
But while there are many factors to consider when investing, there are 2 that may take precedence – safety and efficiency. The key difference between these 2 types of strategies is the effectiveness and security that short-term real estate investments provide. Markets can change drastically within long periods of time, which is a much smaller risk factor in the case of shorter timeframes. In situations such as recessions, what is considered a short-term investment will be of much higher utility to any investor looking for security and fast results.
Top 5 Reasons to Choose Short-Term Real Estate Investments
Now that we’ve parsed out the difference between short and long-term strategies, let’s dive into the top 5 reasons to opt for short-term real estate investments. Each project can be unique, and some factors may change the end result. But what is considered a short-term investment can actually be a very beneficial option in many cases. Let’s take a look at these benefits.
Networking
This one may surprise you, but networking is a very real reason to start short-term real estate investing. Networking is very important in business generally, but it’s especially crucial for investors. What is considered a short-term investment can be of immense utility in acquiring a network wide enough for a successful career. The connections you will gain while building your portfolio through short-term real estate investing can be priceless. As can be the knowledge and experience that the lenders, contractors, and other investors will share with you in the process. Accumulate an extensive network to help you thrive in your career as an investor.
Flexibility
Short-term real estate investments are vastly more flexible – you can make them into whatever you want. Flexibility is especially important if the investor is in doubt or in a difficult financial situation. This flexible type of investment can be easily converted into a quick rental arrangement for a limited period of time such as days, weeks, or months. But if your properties suddenly need to be sold, short-term real estate investments will be the easiest to resell.
Security
Short-term real estate investing can be the strategy that can provide incredible security in times of economic turmoil. Economic problems bring uncertainty, which can taint a long-term strategy greatly. But short-term real estate investing has the inherent advantage of its duration which shields it from market conditions to some degree. Moreover, short-term real estate investing can even have an advantage during a recession. Property prices go down significantly during the early stages of a recession making for some very beneficial deals. Keeping in mind that recessions on average last for about 10 months, investors who employ short-term strategies can benefit greatly.
Low Risks
It naturally follows from the previous point that short-term real estate investing is inherently less risky. Regardless of the economic conditions surrounding the investor, the short-term strategy comes with very low risks. One of the best short-term investment ideas to entertain if you’re looking for the lowest possible risks is the fix and flip strategy. It’s the strategy of buying a property, fixing its current state, and reselling it. This strategy is also infinitely more secure and less risky due to the simple fact of less capital being invested. The amount of money invested in every transaction is significantly lower and thus less capital is put at risk.
High Returns
The biggest reason to start short-term real estate investing is the high return that this type of investment promises. In direct contrast to the low risks that short-term real estate investments entail, the returns they bring are quite high. This is especially valuable when considering the short amount of time needed for the investment to be converted into cash. All these reasons guarantee that a short-term real estate investment strategy is ideal both for experienced and novice real estate investors.
Short-Term Investment Ideas
There are many types of short-term investments to choose from. Each option has a list of pros and cons, but results should be the driving force behind every decision made. With that in mind, here is a quick list for you to choose from.
P2P
If you’ve been wondering how to live off real estate investments, P2P can be a great option. P2P stands for peer-to-peer which are platforms where the investor can lend money for rehab projects and receive interests in return. These interests are often higher than with most traditional options such as REITs and so they are more beneficial for investors. P2P is a convenient option for all those looking for a source of steady passive income.
Real Estate Wholesaling
One of the easiest short-term investment ideas is real estate wholesaling. In some respects, it’s like brokering a deal. You find a property, negotiate a good deal for it, and place it under contract without actually paying for it. Then, you transfer said contract to another investor who is interested in purchasing the property at the price that you’ve negotiated in exchange for a fee to you. Wholesaling is a great example of how to live off real estate investments with a small budget. The profit you generate won’t be insanely high, but it will be substantial compared to your budget.
Fix and Flip
The fix and flip strategy is perhaps the best example of how to live off real estate investments. It’s the process of buying a property to refurbish and resell it. This strategy offers a high yield for a very limited amount of time invested.
It’s among the finest short-term investment ideas that are often employed in order to generate maximum results with minimum risks. If you would like to learn more about fix and flip investments or how to benefit from them, contact GCG Real Estate.