If you are on our website, it means that you are into real estate investing: either an existing investor or a potential one. And if you are in any way involved in real estate investing, we are sure it is with the ultimate goal of making money.
So, you must be very interested in the question HOW TO MAKE MONEY IN REAL ESTATE. Well, there is no simple answer to this question. There are many different ways of how to make money in real estate depending on your interests, preferences, and financial capabilities. In this article, you will look at 7 different ways of how to make money in real estate.
1. Become a Landlord
Maybe the first thought that comes to mind when you think about how to make money in real estate is by becoming a landlord. This means that you purchase an investment property and rent it out to tenants. Well, easier said than done. Being a landlord requires a lot of time and energy as you will have to look for tenants, deal with them, and manage your property while working your full-time job. But it is absolutely doable if you prepare yourself well and are ready to learn. One of the most important first steps you will have to take before starting your search for a rental property to buy is to decide what kind of property is best for you: an apartment, a single-family home, a condo, a multi-family home, an entire apartment building…
Rental property strategies can broadly be divided into two streams: traditional and Airbnb.
a. Traditional Rental Strategy
This simply means that you offer your rental property for long-term leases, usually anything more than a month. Traditional renting has some advantages as more stability and fewer legal issues, but it does not always yield as much profitability as short-term rentals.
b. Airbnb Rental Strategy
The other option is to offer your investment property for short-term leases, anything from one night up to a month. This kind of renting is becoming more and more popular, but it’s also attracting more and more opposition from the hotel lobby and local councils. So, before you decide to go for Airbnb, make sure to study well the legislation in your city. As a reward, however, Airbnb often provides much higher profitability in terms of cash on cash return, cap rate, and rental income than traditional renting.
When deciding whether traditional or Airbnb is the optimal strategy for you, make sure to use Mashvisor’s investment property calculator for real estate comps and predictive figures on thousands of actual properties across the US. One important advantage of Mashvisor’s rental property calculator is that it has all the data divided by traditional and Airbnb, so it allows you to quickly decide which one is the most profitable strategy in each particular case.
2. Real Estate Partnerships
If you decide that being a landlord is not the right job of you, don’t give up on the thought of how to make money in real estate. One other option is to enter into a real estate partnership. Depending on the arrangements between you and your partners, you might end up not having to deal with the tenants directly or with the property management. Remember that real estate partnerships are all about complimenting each other, i.e., don’t enter into a partnership with people who have the same strengths and weaknesses like you. Real estate partnerships give you the extra benefit of sharing the investment risk.
3. Fix and Flips
Yet another way of how to make money in real estate is through fix-and-flips. This real estate investment strategy means that you buy a rental property (under market value), do some fixes around, and resell the property immediately at a higher price. The trick is to find a property whose price will increase significantly after only minimal maintenance work. This strategy is best for dynamic individuals who are not afraid to get their hands dirty with paint.
4. Real Estate Investment Trusts (REITs)
If you wonder how to make money in real estate but are not active enough for fix-and-flips, you can go for a real estate investment trust (REIT), which is a more passive form of investing in real estate. Buying shares in an REIT is very similar to investing in stocks, but your profits will be coming from rents and real estate appreciation. The main benefit is that you will not have to deal with the property or the tenants, but this also means that this way of how to make money in real estate is less exciting than the strategies listed above.
5. Real Estate Properties Wholesaling
Number 5 in our list of how to make money in real estate is by real estate properties wholesaling. This strategy is similar to fix-and-flip, but you don’t even have to worry about fixing the investment property. In wholesaling a real estate property, you contract with a seller, market the property, find a buyer, and assign the contract to the buyer. You can do that with very little money as you don’t have to pay anything to the buyer. Your only expenses will be those associated with looking for potential buyers, and at the end you will receive a fee for the services that you provide to the seller. If you are new to real estate investing and are looking for ways to make money in real estate in addition to gaining some valuable experience in buying and selling rental properties, wholesaling is a great strategy.
6. Real Estate Crowdfunding
In the investment world, crowdfunding has been on the rise in recent years, including in real estate. If you are new to real estate investing or don’t have much money to invest, real estate crowdfunding is an excellent way to learn how to make money in real estate. It’s very similar to a partnership but involves many more partners. It basically means that you will invest a very small amount of money with many other people who will also invest a little each to get enough funds to buy a rental property. As you can imagine, crowdfunding will allow you in start real estate investing with very little money and will allow you to diversify your portfolio quickly. However, beware of the problems which might arise from owning a common property with so many people.
7. Commercial Real Estate Investing
The final major strategy of how to make money in real estate is through investing in commercial buildings. This kind of real estate investing can offer large cash flow as you can charge businesses significantly higher rents than individual tenants, but keep in mind that vacancies tend to be longer in commercial real estate investing.
One great thing about real estate investing is that it is so diverse. There are so many real estate investment strategies depending on your resources and preferences. Once you have decided which one is the best way of how to make money in real estate for you, visit Mashvisor to search through thousands of real estate properties in all major US cities.