In the real estate investment world, there are four major different types of investors:

1) The wholesaler - Pairing sellers and buyers together.

2) The Flipper - Restoring homes at a discount and putting them back on the market for fair market value.

3) The Lender - Lending money to the rehabbers/flippers.

4) The Landlord - Buying discounted properties and holding them long-term for rental income.

While we can tackle all the different types of investing, right now we want to focus on the fourth style, the landlord.

The general strategy for landlords is the buy-and-hold strategy, which basically means they hold on to the property and find long-term tenants that sign year-long leases and pay rent each month.

While this has been going on for many many years, there is a new way generating income from rental properties that can actually 3-5x profits.

And that is with the "master-lease" model.

When AirBnB began, it targeted people that were looking for short-term stays on Craigslist.

They actually went on Craiglist, identified the needs and process that people had developed there, then scraped the listings off of their site and onto theirs.

This was the advent of their short-term listing site that came to be the next level to couch surfing.

With the ability to rent out private rooms or whole homes for days at a time, homeowners learned that they can make an extra bit of income off properties that they were living in part time.

As this method of renting took off, investors saw that there was another opportunity.

Generally, people will look for a place to rent for an event or vacation.

This can be something like a place for a prom night, live show, convention center event, the beach, or a myriad of other uses.

People don't always want the commercial environment of a hotel.

They enjoy having a more private and intimate climate of a home where they can gather and cook on their own time.

Additionally, sometimes these homes are better placed than hotels, and have a more reasonable price range.

Because of that, investors found a way to buy up homes that would be in demand so that they can capitalize on this need that short-term rentals was exposing.

Some investors are able to catch properties that are simply coming from Google searches, such as "sell my house", which affords them the ability to work on high-volume leads that come to them.

With that, they have a larger pile to pick from for rental properties.

Rather than purchasing a property that would rent out for about $1,000 per month, they could now rent these out for $100+ per day.

This meant that after 10 days, they would already accrue the same amount as a long-term rental.

In more popular locations, rental rates could be upwards of $300-400 per night for the entire home.

If the occupancy rate of the property is 50% per month, they would generate nearly $5,000 per month.

That more than covers the cost of the note for the home, and brings in nearly 3x the profit from a long-term rental.

But what if the investor doesn't wish to own the home, or there aren't any of those properties up for sale?

And that's how the master-lease model was born:

An investor can identify homes that are available for rent or have been using the traditional method of renting and approach that homeowner.

If the homeowner agrees to convert to short-term lease, the investor can handle everything from furnishing to management and begin leasing the property on short-term sites such as AirBnB.

The investor and homeowner may agree to a flexible arrangement, or the investor takes on the 12-month lease with the option to sublet to short-term tenants.

The property rents out for daily or weekly rates, and the homeowner takes a percentage, often around 25%, of the total profit which is more than what they would get from their long-term tenants.

The investor generates profit without owning any properties or paying any mortgages.

He simply has to manage the property and install a process that is efficient enough to scale.

This becomes a win-win-win situation that all parties can benefit from.

A renter now has a new option to stay in, the homeowner generates income without dealing with tenants, and the investor generates income without liability of a mortgage.

However, as with all forms of investment, there are always potential downsides.

There are a few solid resources for getting started with the master-lease method if it's interesting to you.

You don't need to have money up front, but it definitely helps if you have some funds to get started because they will cover things like furnishings or supplies that your short-term tenants will except during their stay.

Additionally, you'll want to have someone on staff to take care of cleaning in between visits. 

It's important to have the cleaning done on time, especially if the bookings are within a day of each other.

Now, it's all about location, location location!

Check out places near hotspots in cities, downtown, vacation spots, even some cabins can be great rentals.

Check out some of these resources and let us know what you think in the comments below.

And remember to keep checking back to see our latest updates on market trends at http://houstonhousebuying.zohosites.com.