Common real estate investing strategies you should know

Investing in U.S. real estate offers unique opportunities for international investors seeking to diversify their portfolios and achieve financial independence. However, choosing the right strategy is crucial, as it impacts both financing options and the type of property that will best meet your investment goals. This guide explores common strategies tailored for international investors without U.S. residency and their implications on financing.

Buy and Hold

The buy and hold strategy involves purchasing properties to rent out for an extended period, benefiting from rental income and property appreciation over time. This strategy suits investors seeking long-term, stable returns.

Pros:

• Steady Income: Generates consistent cash flow from rent.
• Appreciation Potential: Property values generally increase over time.
• Financing Options: Non-QM (Non-Qualified Mortgage) loans or DSCR (Debt Service Coverage Ratio) loans focus on the property’s rental income rather than personal income, making them ideal for foreign investors.

Cons:

• Management Required: Long-term ownership requires ongoing property management.
• Market Risk: Rental demand and property values can fluctuate with market conditions.

Fix and Flip

Fix and flip involves buying properties at a low price, renovating them, and selling them for a profit. This strategy requires a keen eye for potential and an understanding of the renovation process.

Pros:

• Quick Profits: Potential for high returns in a short period.
• Flexibility: Ability to reinvest profits into new projects quickly.

Cons:

• High-Risk: Profits depend on market conditions and renovation costs.
• Financing Challenges: Often funded through hard money loans, which are short-term and have higher interest rates.

Short-term Rentals

Investing in short-term rental properties involves purchasing homes or condos to rent out on platforms like Airbnb. This strategy takes advantage of tourist and business travel markets.

Pros:

• High Revenue Potential: Short-term rentals can command higher nightly rates.
• Flexibility: Owners can adjust rental prices based on demand and seasonality.

Cons:

• Regulatory Risks: Many cities have strict regulations on short-term rentals, which can impact profitability.
• Management Intensity: Requires active management and frequent turnover.
• Financing Options: Investors often use non-QM loans or specific short-term rental financing products that account for rental income potential in underwriting.

House-Hacking

House-hacking involves buying a multi-unit property, living in one unit, and renting out the others to cover mortgage payments. However, this strategy may not be viable for international investors without U.S. residency due to legal limitations.

Pros:

• Reduced Living Expenses: Rent from other units can cover mortgage costs.
• Owner Occupancy Benefits: Access to certain owner-occupant mortgage options.

Cons:

• Residency Requirement: Typically requires U.S. residency, limiting options for international investors.
• Personal Involvement: Requires living on-site, which may not be feasible for non-residents.

BRRRR (Buy, Rehab, Rent, Refinance, Repeat)

The BRRRR method focuses on purchasing distressed properties, renovating them, renting them out, and refinancing to recover the investment. It is a scalable strategy for building a rental portfolio.

Pros:

• Portfolio Growth: Allows investors to reinvest funds into new properties.
• Equity Building: Increases property value through renovations.

Cons:

• Cash Intensive: Requires significant upfront cash for purchases and renovations.
• Refinancing Risk: Success depends on the ability to refinance and pull equity.

These strategies represent some of the most common approaches to real estate investing for international investors. Each comes with its own set of pros, cons, and financing implications. It’s important to assess your investment goals, risk tolerance, and financing options carefully. Consulting with a real estate professional can help you determine the best strategy for your unique situation. At Milo, we’re here to support you in achieving your financial freedom through real estate financing in the U.S. Book a call with us today to explore your options.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.