Vacant home investing sounds like a promising opportunity. You can secure a home for under market value, fix it up, sell it for a profit or rent it out. However, there are a number of reasons why many investors shy away from vacant home investing in the first place.
Whether you’re an investor located in Portsmouth, Virginia Beach, Hampton, or any other area in Virginia, there’s a number of ways to get started in real estate investing. Let’s talk about vacant home investing in Virginia and what you need to know before getting started.
Benefits of Investing in Vacant Homes
Before we talk about investing strategies when it comes to vacant homes, it’s important to understand the benefits and why this type of investing is so popular.
- Buying Under Market Value: Like we mentioned, one of the top reasons Virginia house buyers choose to purchase vacant homes is due to the fact that they can often secure them for under market value. This allows investors to spend more on renovations and potentially increase their profit margins when selling or command higher rental income from tenants.
- Renovation and Appreciation: Whether it’s through forced appreciation or natural appreciation, purchasing vacant homes gives investors the ability to take advantage of their properties increasing in value.
- Diversification: Savvy real estate investors understand that the market is unpredictable and the need to diversify their portfolio is crucial. Purchasing vacant homes offers another sector of the real estate industry that investors can expose themselves to.
Drawbacks of Investing in Vacant Homes
While vacant home investing can be profitable for savvy and experienced real estate investors, there are some downsides to consider before starting your new venture with vacant homes.
First, vacant home investing in Virginia often comes with renovation challenges that are complex and more costly than anticipated. The cost of materials and labor continues to rise with inflation and delays in construction can cost investors thousands.
Additionally, vacant homes may have high maintenance costs to prevent deterioration or damage from weather conditions. These costs can significantly add up over time if the property remains vacant for an extended period.
Vacant Home Investing Strategies
When it comes to investing in vacant homes, there are a variety of viable investing strategies regardless of your level of experience. Let’s talk about the most popular vacant home investing strategies that successful investors use today.
Buy and Hold
The first vacant home investing strategy is the most common and tried-and-true method available. The buy and hold strategy involves purchasing a vacant home with the intention of owning it on a long-term basis.
The buy and hold strategy can be particularly profitable for Virginia investors targeting upcoming neighborhoods or areas experiencing gentrification. Investors typically renovate the previously vacant home and rent the property out to tenants for passive income or for a profit in the future.
Keep in mind that property management is a key aspect of the buy and hold strategy. Once the property is rented to paying tenants, investors must maintain the property themselves or hire a property management company to handle the day-to-day operations and upkeep of the property.
In doing so, investors can expect to see profits from their buy and hold investments on a long-term basis in favorable real estate conditions.
Fix and Flip
The fix and flip investment strategy allows investors to purchase a vacant Virginia home, renovate it, and sell it to another investor or homeowner for a quick profit. This strategy has become popular over the years from HGTV shows highlighting the trials and tribulations of house flippers.
However, the fix and flip strategy requires careful planning, research, and expertise for success. Even with perfect planning and execution, fix and flip investing often comes with its ups and downs due to the unpredictability of real estate investing.
Investors must find reliable contractors and pay them at a rate that leaves room for profit after the sale. They’ll also need to come up with design plans or work with architects to plan out the renovated interior and exterior of the home. After renovation, investors must market the property to find a buyer willing to pay their asking price.
Wholesaling
The real estate wholesaling strategy is a great option for investors who don’t want to make expensive renovations and manage home improvement projects.
This investment strategy involves finding motivated sellers who want to sell their house fast and take cash for houses. Once the wholesale investor locates homeowners who want to sell their home in Virginia, they negotiate with the seller to secure the property under contract at a favorable price.
The primary benefit of the wholesale investing strategy is that the wholesaler never has to use their own capital. They simply secure the contract for the home purchase then assign the contract to a buyer for a fee. Some Virginia wholesalers make $10,000 to $30,000 per contract on each deal they secure.
Vacation Rentals or Airbnb
In many areas in Virginia, Airbnb and vacation properties are extremely popular with demand increasing each year. This presents a promising opportunity for investors looking to break into the vacation rental investing space.
The first step to becoming a vacation rental investor with vacant homes is to do extensive research on tourism trends in the areas you’re looking to target. You’ll need to invest in areas with high rental demand in peak seasons (typically in the summer months) and consider how local regulations may affect your vacation rental business.
If you choose to invest in vacant Virginia homes, you’ll probably come across properties that need repairs or renovations before they can be used as a vacation rental. Just like fix and flip investors, vacation rental owners should work with reliable contractors and furnish the property with ample amenities that enhance the guest experience.
Final Thoughts
Depending on the investment strategy you choose, vacant land investing can be a risky venture with no guarantee of success. However, with proper planning, research, and a bit of luck, vacant home investing can be your route to success in real estate.