You’ve probably heard the warning not to put all your eggs in one basket, and nowhere is this advice more important than with your investment portfolio. Investing in real estate allows individuals to broaden their financial interests beyond the stock market.
Whether you’re just starting out or looking to expand an existing real estate portfolio, this guide offers a side-by-side comparison of common real estate investment strategies, including house hacking, flipping and commercial investing.
Key Takeaways:
- There are many ways to invest in real estate, depending on your preferences and goals.
- You don’t need to become a landlord to invest in real estate. For example, you can invest in your own residence or purchase real estate investment trusts (REITs) instead.
- If you want a more active role in real estate investing, house flipping, commercial investing or the BRRRR method may be for you.
Real Estate Investment Strategies
Maybe you’re new to the real estate market, or perhaps you’re a seasoned investor. Regardless, you can find a real estate investment strategy to align with your goals and comfort level. Consider these options below when deciding how to invest in real estate.
1. Purchase A Home
Don’t overlook purchasing a home as a potential real estate investment strategy. A house can make up a large portion of your net worth, provide potential tax advantages and offer nonfinancial benefits like security and privacy. Buying a house, however, is a major financial commitment. Recent data from the Federal Reserve Bank of St. Louis shows the median sale price of a home in the U.S. for the first quarter of 2026 was $403,200.
How To Get Started
If you’re ready to invest in your first home, start by getting your finances in order. Check your credit, assess your budget and savings, and use a mortgage calculator to estimate how much house you can afford. You’ll also want to get preapproved for a mortgage before you start shopping for a house.
Who It’s Best For
Purchasing a home is best for investors who want to own their primary residence but don’t want to manage additional properties. It’s also a good way to get familiar with the industry if you think you may want to invest in other properties down the line.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Build equity, which you can later tap into for other expenses | Large upfront cost can require years of saving |
| Gain a sense of permanence | Certain costs, such as taxes, insurance and maintenance, are ongoing |
| Potential for property value appreciation | Late or missed mortgage payments may lead to serious financial repercussions |
| Renovate or change the interior and/or exterior of the home | |
| Enjoy potential tax benefits, such as mortgage interest deductions if you itemize deductions. |
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2. House Hacking
House hacking is a term that refers to purchasing a multifamily property, living in one unit and renting out the others. This allows you to build equity while simultaneously collecting rental income – potentially even enough to cover your mortgage.
How To Get Started
First, think about what type of living and housing situation you’re comfortable with. For example, are you willing to share walls with a neighbor? In that case, you could think about purchasing a duplex. The next step is figuring out your financing, first by consulting your budget and determining the best type of mortgage loan for your situation.
Who It’s Best For
House hacking isn’t for everyone, especially those who have no interest in screening and working with tenants. But if you don’t mind being a landlord and have no problem living next door to your renters, house hacking may be an enjoyable strategy for you.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Build equity while earning rental income | You likely have to manage tenants and your property |
| May be easier to finance | Legal issues can arise from landlord-tenant disputes or with homeowners associations (HOAs) that impose rental restrictions in a neighborhood |
| Earn passive income without needing to purchase a second property |
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3. Rental Properties
There are several ways to earn income from a rental property, making this strategy a bit like a choose-your-own-adventure scenario. For example, you can rent out your property on a long-term basis, providing housing to local tenants. Or you can take part in the short-term rental market, offering a vacation rental on platforms such as Airbnb or providing a rental option for corporate relocations.
How To Get Started
Owning a rental property can be profitable, but it requires a lot of upfront homework to get it right. Before you can start earning income from a rental property, you need to consider what type of rental strategy would work best for your situation: short- or long-term. Then, start looking for properties with the potential to be profitable, either with tools like Zillow or Redfin or by working with a realtor. As you consider different properties, estimate how much rent you could charge by researching comparable homes in the area.
You’ll also need to determine whether you want to manage the property yourself or hire someone else to do it. If you choose the latter option, you’ll need to thoroughly research and vet your options. Then – and only after doing your due diligence – you’re ready to begin the process of buying a rental property.
Who It’s Best For
If you want to earn rental income, maintenance and repairs are a major consideration. You should either be handy and willing to show up whenever you’re needed, or plan to hire and pay a property manager. Of course, buying a rental property also involves a significant upfront investment, so keep that in mind.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Earn steady income | Large upfront investment |
| Potential for property value appreciation | Ongoing property management responsibilities |
| Benefit from tax deductions |
4. House Flipping
Flipping a house involves buying a house and selling it for a profit, all within a short period of time. A home that needs few renovations may be ready to sell within a matter of weeks; however, a property that needs extensive work may require months of renovations. After property owners complete the necessary renovations, they need to stage the home to prepare it for prospective buyers.
House flipping isn’t limited to HGTV stars – it’s a legitimate strategy for everyday real estate investors. According to housing data firm ATTOM, 7.4% of home sales were flips in the second quarter of 2025.
Flipping a house often involves giving a fixer-upper a significant remodel. Done well, it can yield a healthy profit, but flipping houses isn’t for the faint of heart. There’s always the possibility of losing money, especially if you run into issues with renovations or have trouble selling a property. Contractor-related issues, including delays and added costs, are another common risk to be aware of. Though you can’t completely avoid these risks, you can protect yourself by vetting contractors, requesting detailed contracts and setting aside a budget for unexpected costs.
How To Get Started
For a successful house flip, sticking to a budget is key. Plan to spend a lot more than you think on your first flip. If you don’t plan to pay cash, consider your loan options and shop for a mortgage before looking for a property. When you start your search, focus on homes that fit your budget and offer plenty of potential. A good real estate agent with relevant experience can be a huge asset.
Who It’s Best For
Flipping houses is best for those with sufficient cash to purchase a home and a vision to fix it up. You should also be willing to stomach the potential surprises that come with renovations.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Potential for a quick turnaround on your investment | You’ll need to make a large upfront investment |
| Potential for a large, lump-sum profit | Risk of losing money |
| Potential unexpected costs | |
| Major time investment |
5. Buy, Rehab, Rent, Refinance, Repeat (BRRRR)
If you’re excited about flipping properties and growing your portfolio of real estate, the BRRRR method may be for you. It’s similar to flipping a house, but instead of selling your newly renovated property, you rent it out instead. This process involves the following steps:
- Buy: Purchase a property that needs some work, ideally at a low price point.
- Rehab: Renovate the property to make it move-in ready.
- Rent: Find a tenant to rent the home. The income can go toward your purchase and renovation costs.
- Refinance: Once you have enough equity in the property, do a cash-out refinance of an existing loan to access a portion of the equity of the home. This type of loan rolls the amount of borrowed equity into the mortgage principal. However, the equity you borrow is paid as a lump sum at closing.
- Repeat: Use the cash from your refi as the down payment for another fixer-upper and start the process again.
How To Get Started
The first step in investing with the BRRRR method is to figure out how you’ll buy your first fixer-upper. If you don’t have cash, consider other methods of financing, such as taking out a mortgage or borrowing against your primary residence.
Who It’s Best For
Because this investing strategy involves renovating and being a landlord, it’s best for people who are willing to put in a lot of time. If you’re looking for a more passive real estate investment strategy, you may want to consider other options.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Grow your portfolio by leveraging your initial property | You’ll need a large sum up front to purchase your first property |
| Continue earning rental income as long as you rent out the properties | Very time-intensive |
6. Commercial Real Estate Investing
Commercial real estate includes malls, storefronts, office buildings, retail space, industrial properties and large multifamily buildings – essentially any property that generates income. Investing in these types of properties can have larger financial returns, but doing so has risks, too. Lease terms and tenant responsibilities can differ from residential rentals – for instance, leases may last longer, and tenants may be responsible for maintenance.
How To Get Started
Determine your goals for commercial real estate investing, including the type of building you want to purchase, how much profit you want to earn and any other intentions you have with your investment. Then it’s time to find financing, which will involve shopping around and comparing loans. If it’s your first time shopping for a commercial property, find a real estate agent to help you navigate this process.
Who It’s Best For
Commercial real estate investing makes the most sense for those willing to make a very large investment and navigate the potentially complex landscape of commercial real estate loans.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Potential for higher profits | More involved application process |
| Long-term leases may be common | Can be more sensitive to market downturns |
| Commercial tenants may have more responsibilities than residential tenants | Very large upfront investment |
7. REITs
Real estate investment trusts, or REITs, are companies that own and operate income-producing real estate or real estate assets. For example, REITs may own hotels, malls, storage facilities, apartments or commercial properties. REITs are a form of passive real estate investing: By purchasing them, you can invest in real estate without buying a house or individual properties. According to the National Association of Real Estate Investment Trusts, in the 25 years between 1998 and 2022, REITs had an average net return of 9.7%.
How To Get Started
If you want to purchase publicly traded REITs, you can do so on a major stock exchange through a broker. You can also buy REITs through a REIT mutual fund or exchange-traded fund (ETF).
Non-traded REITs aren’t as straightforward. You have to purchase them through a broker that participates in the REIT’s offering. These types of REITs also come with higher fees, historically as high as 7% – 10% of the investment.
Who It’s Best For
REITs are a great choice for someone who wants to add real estate to their portfolio without actually purchasing property by themselves.
Pros And Cons
| Pros: | Cons: |
|---|---|
| Expand your investing portfolio without buying a physical property | High upfront fees for non-traded REITs |
| Diversify your real estate portfolio without buying multiple properties | Non-traded REIT values can be hard to determine |
| Lower upfront costs compared to purchasing a property | Dividends are normally taxed as ordinary income, which can mean a higher tax rate than some other types of investment income |
| Publicly traded REITs are relatively liquid, especially compared to physical real estate |
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Bottom Line: Start Investing In Real Estate With These Common Strategies
Investing in real estate can be an effective way to diversify your portfolio. With real estate investment strategies like house flipping, REIT investing, house hacking and others, there are options for anyone who wants to get started. Though real estate has the potential for high returns, like any good investment, there are also risks. Whichever route into real estate you take, be sure to do your due diligence.
Ben Shapiro
Ben Shapiro is an award-winning financial analyst with nearly a decade of experience working in corporate finance in big banks, small-to-medium-size businesses, and mortgage finance. His expertise includes strategic application of macroeconomic analysis, financial data analysis, financial forecasting and strategic scenario planning. For the past four years, he has focused on the mortgage industry, applying economics to forecasting and strategic decision-making at Quicken Loans. Ben earned a bachelor’s degree in business with a minor in economics from California State University, Northridge, graduating cum laude and with honors. He also served as an officer in an allied military for five years, responsible for the welfare of 300 soldiers and eight direct reports before age 25.
