Every investment involves risk. However, low-risk investments allow the chance of a return with little risk of losing your initial investment. While potential profits are comparatively low, low-risk investments often require minimal financial outlay and usually perform as predicted.
What strategies are considered low-risk in real estate investing? Here are three ideas to consider:
Buy, Rehab, Rent, Refinance, Repeat. The BRRRR method of investing stresses building a real estate portfolio one property at a time, covering costs as you go. This process involves purchasing an undervalued property, renovating to increase its value, renting out the unit to achieve a steady cash flow, and refinancing to recover the restoration costs and possibly make a downpayment on another property. Once an investor has successfully recuperated his costs from the first property, he’s ready to take on a new project. However, even landlords who don’t follow the entire process can isolate steps that benefit their business, such as finding undervalued properties or looking for profitable refinancing opportunities.
Offer Short-Term Rentals. Short-term rentals in popular vacation areas can provide a steady income source when managed well. Seasonal fluctuations are often predictable in vacation hubs, and you can easily adjust prices to accommodate shifting supply and demand. Thanks to platforms like Airbnb and VRBO, marketing and managing these properties are easier than ever. Keep in mind that ensuring a vacation rental is low-risk requires choosing units in high-tourism areas and setting prices that minimize vacancies while offsetting costs.
Don’t Go It Alone. Opportunities abound to collaborate with other investors on rental property projects, including crowdfunding, joint ventures, and real estate syndicates. These group undertakings allow each investor to put in a smaller initial investment while providing access to more significant projects. Working with others pools financial resources and combines effort and expertise. These ventures can be low risk because the financial exposure is spread among multiple participants. But be sure you choose trustworthy collaborators and solidify your plans in writing.
Maintaining a steady cash flow can be as basic as researching before investing and putting in the effort to find and keep quality tenants. Being aware of market trends and tenant preferences will keep your business current. Plus, staying flexible with backup plans and a diverse portfolio will put you in the best position to ride out market downturns.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management, and we’re here to help landlords navigate the rental market.
