How to Develop a Long-Term Strategy for Real Estate Investing

 

As most investors know, real estate investing can be a lucrative and rewarding venture. For those who are unfamiliar with this investment strategy, it involves purchasing, owning, managing, renting, or selling real estate properties for the purpose of generating profit.

One of the best qualities of real estate investing is the fact that it can take many different forms. Home ownership, multifamily investing, and house flipping are only some of the most common ways to invest in real estate. Investors can acquire residential and commercial properties alike. Some even go for undeveloped land or real estate investment trusts (REITs). [1]

Real estate investing is associated with rental income, tax benefits, and the potential for appreciation in property value over time. Investors can generate income through rental properties, where tenants pay rent to use the space. Others rely on property appreciation in order to earn substantial capital gains when they sell.

Despite its potential benefits, real estate investing requires a well-thought-out strategy, especially if your goal is to build wealth over time. With the right approach, you can build a strong real estate portfolio and generate a steady stream of passive income. Here we will discuss how you can develop a suitable long-term strategy in real estate.

Why is a Long-Term Strategy Important for Real Estate Investing?

Real estate investing is not a get-rich-quick scheme. It requires patience, dedication, and a long-term approach to see significant returns. A well-developed long-term strategy can help you navigate the ups and downs of the real estate market and ensure that your investments continue to grow over time.

Investing in real estate for the long term means holding an investment property for a long period of time before selling it again. To be successful, long term investments in real estate heavily rely on cash flow. [2]

This approach is recommended because short term strategies like house flipping and house wholesaling can be very volatile. Most investors go for real estate investments because they do not like the volatility of other investments like stocks and bonds.

Long-term real estate investing can be a good source of consistent cash flow. Long-term real estate investments tend to produce high and positive cash flow. You just have to make sure the investment property is in a good location that guarantees a high occupancy rate. [2]

The long-term nature of real estate investing allows investors to ride out short-term market fluctuations and benefit from the upward trend in property values. Since property values tend to appreciate steadily over time, the real estate market is generally considered to be stable. However, to make the most out of it, you need to develop a long-term strategy.

Long-term strategies allow for strategic property management decisions, such as renovations or improvements, which can enhance the property’s value and rental potential over time.

By investing in different types of properties and in different locations, you can also enjoy the benefits of diversification. A long-term strategy lets you spread out your risk and minimize the impact of any potential market fluctuations. In essence, a long-term approach in real estate enables you to maximize returns as you work towards a more stable financial future.

Define Your Goals and Objectives

Before you can develop your real estate investing strategy, you need to know your goals and objectives. Are you looking to generate passive income, build equity, or both? How many properties do you want to own in the next five, ten, or twenty years? Having a clear understanding of your goals will help you make informed decisions and stay focused on your long-term strategy. In real estate investing, goals give you direction. [3]

Defining clear and achievable goals is the cornerstone of developing a successful long-term strategy for real estate investing. Begin by identifying your financial objectives, whether it’s wealth accumulation, passive income generation, or retirement planning.

Define the timeline within which you aim to achieve these goals. Before choosing a real estate investment approach, you need to consider your risk tolerance. Different real estate investment strategies carry varying levels of risk.

Assess whether a long-term real estate investment fits your objectives and risk tolerance. By establishing concrete and realistic goals, you can create a roadmap for your real estate investment journey. This will inform all your decisions moving forward.

Research and Analyze the Market

The real estate market is constantly changing, and it’s important to stay informed about current trends and projections. Conduct thorough research and analyze the market to identify potential investment opportunities.

One major advantage of investing in real estate is that it is a tangible asset that you can physically assess. Take advantage of this by seeing the investment property yourself before investing. Consider the infrastructure, location, local supply and demand, and projected costs. Also look for signs of damage like mold, plumbing issues, etc. [4]

With real estate investing, the location is especially important because that is one of the first things people will consider before moving into a new rental property. Don’t just assess the property itself but also its external environment. Remember that your investment property will be affected by things like weather and natural disasters, local crime rates, shifting demographics, etc. [4]

Try to look for an investment property that is located near schools, transportation, hospitals, malls, restaurants, parks, and other important establishments.

Real estate investing can be incredibly complex. Investors will also have to consider factors such as population growth, job market, and rental demand in the areas they are considering. However, in the long run, it is better to be prepared and aware of all potential concerns instead of being completely clueless.

Developing a successful long-term strategy for real estate investing therefore begins with thorough research and analysis of the market. Not only will this help you identify opportunities, it will also help you mitigate risks.

Create a Budget and Stick to It

Developing a long-term strategy for real estate investing involves creating a comprehensive budget and, more importantly, committing to it.

Knowing your budget will help you identify which real estate investment opportunities are within reach. This enables you to choose the investment property that will bring you closest to your investment goals without breaking the bank. The budget will serve as your financial roadmap, outlining your goals, anticipated expenses, and even your potential returns.

Start by evaluating your current financial standing, taking into account your income, savings, and any existing debts. Identify a realistic budget for real estate investments, considering factors like property acquisition costs, renovation expenses, property management fees, and potential vacancies.

Once the budget is established, you need to stick with it closely. Do not go for properties that are too expensive and therefore too risky. A disciplined approach will benefit you greatly in the long-run.

Consider Different Types of Properties

With your investing goals and budget in place, you can now take a look at the different types of properties that are available to you.

There are many different types of real estate including residential real estate, commercial real estate, industrial real estate, land, and special purpose properties. [1]

Make sure to weigh the pros and cons of each of them. For example, a single-family property may be easier to acquire because they are smaller and more affordable. However, they also stop producing rental income as soon as the tenant leaves and the property becomes vacant. A multifamily property on the other hand may be bigger and more expensive, but the multiple units means that its cash flow is largely unaffected by vacancies.

Commercial properties, including office buildings or retail spaces, may provide higher rental yields but come with different risk profiles. Industrial properties, such as warehouses or manufacturing facilities, can also be lucrative in certain markets. Additionally, exploring niche markets like vacation rentals or senior housing can open up unique investment opportunities.

When building a real estate portfolio, it’s important to consider different types of properties. Each type of property has its own advantages and disadvantages, and diversifying your portfolio can help mitigate risk and maximize returns.

By strategically combining different types of properties in your portfolio, you can create a well-balanced and resilient real estate investment strategy that aligns with your financial goals and risk tolerance over the long term.

Plan for Property Management

Managing your properties can be a time-consuming and challenging task, especially as your portfolio grows. Not every real estate investor has the time to take on the role of landlord. However, if you are trying to generate rental income by taking on tenants, this is a role you will have to play.

This is where property management comes in. Property management is something you have to plan for from the beginning because it will take a significant portion of your budget.

When you purchase a real estate property, you will either manage it yourself or hire a professional property management company. The latter will ensure that your properties are well-maintained and that you have a reliable source of rental income. The property management company will handle the day-to-day operations and maintenance of your properties.

If you do not have the time or experience to handle the business-related tasks involved in real estate investing, then you need to consider the option of hiring a property manager. Their responsibilities include collecting rent, handling maintenance, taking care of tenant concerns, and dealing with emergencies. [5]

Perform your due diligence by identifying reliable property management professionals or companies with a proven track record. Multifamily properties often generate enough rental income to warrant hiring a property manager.

Continuously Monitor and Adjust Your Strategy

The real estate market is constantly evolving, so you need to continuously monitor and adjust your strategy accordingly. Keep an eye on market trends and if necessary, make adjustments to your strategy. Some investors consider selling properties that are not performing well or investing in new opportunities as they arise.

Long-term real estate investing means that you will encounter changes in economic conditions, interest rates, and certain local factors like new developments in the area. To increase the chances of a successful investment, you have to stay on your feet and adapt your strategy based on changing market trends.

Regularly review your portfolio’s performance, reassess your risk tolerance, and update your goals as needed. Embrace flexibility because the real estate market is dynamic.

Consider Multifamily Syndication

It is challenging to develop a long-term strategy in real estate and there is no guarantee that it will actually be successful. But there is a way to invest in real estate for the long-term while minimizing the risks. It is called multifamily syndication.

Multifamily syndication is an investment strategy that involves pooling together capital from multiple investors to acquire and manage a single multifamily real estate property.

A real estate syndication deal can be done with any type of real estate property, but because of the strong and predictable cash flow of multifamily properties, multifamily syndication is very popular. Multifamily properties like apartment communities and condominiums are also generally more expensive, so they are harder to access for lone investors. Multifamily syndication makes these investment properties more accessible.

The syndication process typically involves a syndicator, who is an experienced real estate professional or company that is responsible for putting the entire deal together. The syndicator or sponsor serves as the general partner (GP) in the syndication deal. They are responsible for identifying investment opportunities, structuring the deal, and finding real estate investors who will participate. [6]

Investors take on the role of limited partners (LPs) meaning they have limited liabilities and responsibilities in the deal. All they have to do is contribute capital to the syndication and pay some fees to get the syndication deal running. In return, they receive a share of the profits generated by the property. Depending on the deal structure, investors may also earn a share of the equity upon resale. However, every syndication deal is different. [6]

Because the syndicator also takes on the responsibility of property management, this is a true passive investment in real estate. It is a good source of passive income for real estate investors.

Keep in mind that most syndication deals are exclusive to accredited investors, meaning those that fit the criteria set by the US Securities and Exchange Commission (SEC). Accredited investors have the financial safety net and the investing knowledge necessary to participate in unregistered deals and exclusive investment opportunities like multifamily syndication. [6]

A well-developed long-term strategy is crucial for success in real estate investing. By defining your goals, researching the market, creating a budget, and continuously monitoring and adjusting your strategy, you can build a strong real estate portfolio and achieve financial stability in the long run.

If your goal is to generate passive income without having to become a landlord, multifamily syndication is something you should consider.

Work With BAM Capital for the Best Multifamily Real Estate Syndication Deals

It is not easy developing a long-term real estate plan and then executing it properly. If you do not want the headaches associated with property management, but still want its long-term benefits, multifamily syndication may be the right choice for you.

Multifamily syndication solves a lot of the problems investors encounter when investing in multifamily real estate such as the high cost of entry and the demanding nature of property management.

But since multifamily syndication is arranged and executed by a syndicator, it is important to do your due diligence and find a trustworthy company to work with. The syndicator will be making all the decisions in the syndication deal, so working with a company with a track record for excellence is a good idea.

Accredited investors who want to work with a reliable syndicator should contact BAM Capital.

BAM Capital is an Indianapolis-based syndicator that is considered to be a leader in its industry. They have a strong Midwest focus, prioritizing high quality multifamily properties that are Class A, A-, and B++, particularly those with proven upside potential and in-place cash flow. [7]

Being a vertically-integrated company means that BAM Capital can handle the entire syndication process themselves and they can walk you through it. BAM Capital will handle every step of the syndication from acquiring high quality multifamily properties to managing and renovating them.

This syndicator is also known for its award-winning strategy that creates forced appreciation while mitigating investor risk. In fact, BAM Capital now has over $700 million AUM and 5,000+ units thanks to this approach. [7]

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.

For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, schedule a call with BAM Capital and invest today.

Sources:

[1]: https://www.investopedia.com/terms/r/realestate.asp

[2]: https://www.mashvisor.com/blog/real-estate-investments-long-term/

[3]: https://www.fortunebuilders.com/5-real-estate-business-goals/

[4]: https://online.hbs.edu/blog/post/real-estate-investment-analysis

[5]: https://www.indeed.com/career-advice/finding-a-job/what-is-property-management

[6]: https://multifamilyrefinance.com/apartment-investing-blog/multifamily-syndication#important

[7]: https://capital.thebamcompanies.com/