The thing about the real estate investing business is that it’s an ocean of options and opportunities. Continue reading to find out how to make money in real estate.
With the wide choice of investment strategies, in this blog, we are going to present a few options that are very financially rewarding and easy to get into.
Related: What Are the Top Investment Strategies in Today’s Real Estate Market?
In general, there are two ways you can start making money in real estate: Short-term investments and long-term investments. Here is what both strategies entail:
Short-term investments are basically those which enable you to make money in real estate over a short period of time. In some cases, you can make money in a span of a week and in other cases in a span of a few weeks. So, here is how to make money in real estate with short-term investments:
#1. How to make money in real estate: Commissions and fees
As for how to make money in real estate through commissions and fees, there are plenty of options. Luckily, this type of business offers a wide variety of real estate careers that do not involve buying an investment property. You can make a living in real estate simply by providing services. For example, you can become a real estate attorney. Another option is to become a real estate agent who finds investment deals for other investors. Other examples of such careers are a real estate appraiser and a property inspector.
Furthermore, to start such careers, you have to get licensed first. Therefore, these particular types of jobs require that you have a proper real estate education. In addition to that, you will have to pass the real estate examination to do so, especially if you are considering becoming a real estate agent or a broker.
#2. How to make money in real estate: Wholesaling investment properties
Becoming a real estate wholesaler is another option if you are still wondering how to make money in real estate. In fact, wholesaling real estate is one of the safest and therefore best real estate investments in the business. Essentially, one does not need much to get into wholesaling properties. First of all, you do not need licensing or official real estate education. What’s even better, you can work with investment properties with little or no capital at all. Finally, you are free to work part-time as it does not demand commitment for long periods of time.
#3. How to make money in real estate: Fixing and flipping investment properties
Another short-term investment through which you can make quick money is fixing and flipping properties. The concept behind this strategy is simple; you purchase a distressed investment property, renovate it, and resell it to another buyer. The profit is generated when you sell the property. The reason behind that is that you buy the property for below market value. The renovations lead to a forced appreciation which means the property rises in value once you’re done renovating it.
With this particular investment strategy, you are stepping into the realm of becoming a real estate investor. Thus, there is one thing you should keep in mind: fixing and flipping properties is a high-risk strategy. The main reason for this is that you are risking a considerable amount of money since you are buying an investment property.
To mitigate the risks, we suggest that you take into account the profitability analysis. This type of analysis consists of the comparative market analysis in addition to the investment property analysis. The first type deals with the location and the property in comparison to other similar investment properties that are located in the same area. The latter type deals with the most important measures that determine how rewarding an investment property is. The main focus of the investment property analysis is the return on investment.
All in all, you want to make sure that you are able to sell the property for a price that covers for renovation cost while keeping a profit margin for you.
The long-term investments are those that provide an income over an extended period of time. It comes in the form of investing in income properties. An income property usually provides a steady stream of income for real estate investors. This, in reality, makes long-term investments reliable when making money in real estate. Therefore, here is how to make money in real estate with long-term investments:
#1. How to make money in real estate: Buy and hold real estate properties
Buy and hold real estate is one of the most traditional real estate investment strategies in the business. Many real estate investors have used this strategy either with real estate properties or raw land. Either way, they were able to generate wealth by holding onto properties while they appreciate in value. By the time they sold them, they had made a fortune.
The most successful real estate investors were able to engage in this strategy with another one: rental properties (which we’ll be discussing next). This resulted in a double profit in the long-term. The combination of rental income in addition to the appreciation rate is what a real estate investor would want to reach their financial goals.
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#2. How to make money in real estate: Investing in rental properties
Just like we’ve mentioned before, a rental property provides a real estate investor with a steady income throughout the lease term. Thus, to make sure that a property will generate that steady income, an investor must perform a comparative market analysis in addition to an investment property analysis. The entire rental property business depends on the cash flow a property generates. This means that you deduct the monthly rental expenses from your monthly rental income. The rest is called the cash flow which you get to keep as profit. One thing we suggest though is that you read the following blog to learn how to buy a rental property the right way “How to Buy a Rental Property Using Mashvisor.”
#3. How to make money in real estate: Passive income investments
The good news is that you do not have to be actively involved in the business of real estate investing to make money. There are a few investment strategies that you can choose to work with while keeping your 9-5 job.
A popular choice for a beginner real estate investor would be a real estate syndication. This type of investment concept is pooling financial resources to fund major real estate projects. Therefore, your only responsibilities are limited to providing the funds for a real estate syndicator to carry on with the project. Other than that, you can sit back and enjoy receiving your share of the profit on a steady basis.
Another form of passive income investments is the Real Estate Investment Trusts. These are companies that make major real estate investments in different types of properties. Similar to the concept of real estate syndication, it is limited to financial involvement rather than physical involvement.
In conclusion, we hope that we were able to give you enough insight on how to make money in real estate. However, some of the mentioned investment strategies, such as the fixing and flipping of properties, are not suitable for a beginner real estate investor due to the high risk associated with it. Still, there are some that make for the best real estate investments.
As for the profitability measures, we recommend that you check out Mashvisor’s rental property calculator. It will save you the time and effort of performing such calculations. Plus, it will provide you with the most accurate data based on the information you provide.
Related: Every Real Estate Investor Needs These Real Estate Analytics Tools
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