Making money is the goal when getting into real estate income properties. Every real estate investor asks him/herself how to make money through real estate income properties before buying an investment property. This is a valid question as income properties are tricky to manage. The strategy chosen when investing in income properties will dictate the management style. This means that the best income investments are decided through the management style chosen by the real estate investor.
Income properties are residential, or even commercial, properties that are used to generate income for the investor. There are many ways of generating income through monthly rental income, leasing, and/or appreciation value. It is obvious that there are many different styles of making money in real estate. So, here are the top 5 investment strategies to use when investing in income properties.
The Airbnb rental strategy is weird when compared to traditional rental incomes. While the traditional rental strategy, income properties profit from limited turnover. Airbnb rental income properties, on the other hand, profit from having a higher turnover rate. An Airbnb rental property in the right location is capable of being more profitable than a traditional rental income property. Location is a big factor in order to receive the best income from an Airbnb rental. It is generally important to have a good location when investing in real estate properties, but this holds even more true with Airbnb rentals. Airbnb is the purest form of hospitality for real estate investors. An Airbnb investor needs to understand his/her customers motives. Airbnb guests are usually coming for a small trip/vacation and want to be near the fun. Owning an Airbnb investment property is the most hands on form of owning and managing income properties. The time in between tenants (Airbnb guests) is hectic and requires the landlord (Airbnb host) to reorganize/clean the house before the next guests show up.
Traditional Rental Income
As briefly mentioned earlier, the success of a traditional rental income property is based on maintaining tenants and limiting vacancies. A traditional rental income comes in many different forms of income properties. Real estate investors can make money by owning apartments, single family homes, and/or multi family homes in whichever location they see best fit for their needs and preferences. Like with any other real estate strategy, location is crucial for the success of a traditional rental property. When considering location for traditional income properties, the real estate investor needs to take into consideration the needs of the desired tenants. To make money with real estate income properties, the landlord needs to plan what kind of tenants he/she is hoping to have during the preliminary stages. For example, a young family would prioritize a location with good schooling and parks as opposed to young adults who would focus on the sources of entertainment. Traditional income properties require a lot of work when certain unpleasant situations develop (such as damage caused by tenants or a tenant not paying rent). However, a well maintained property can limit the frequency of issues arising.
Property Investment Companies
Making money in real estate investing does not always have to be tedious and hard. A real estate investor is capable of making money in investment properties through the use of property investment companies – through passive income. What property investment companies do is essentially purchase real estate properties that are foreclosed or unwanted and sell them for a larger profit margin. This may initially not sound appealing to a real estate investor. A good real estate investor gets the most bang for his buck, so why make money this way. This simply comes down for a person wanting to get into the real estate investment business without committing to the work that comes along with it. A property investment company will take a portion of your rental income but will manage your property. This includes repairs and issues, finding tenants, and most of the problems that will arise. Their job is to ensure your income property is at its best without the investor having to worry about it.
Fix and Flip
Other options of making money in real estate can include a quick turnover for quick cash. These income properties come in the form of a fixer upper real estate investment. A fix and flip real estate is pretty straight forward. Real estate investors buy properties that have the potential to resell for more money after some renovations. An important factor to consider with buy and fix income properties is to only spend enough money on repairs that the investment is able to return plus a little bit more. Ultimately, the local housing market will dictate how much money the income property will be able to get in return. For that reason, a real estate investor needs to strategize wisely by repairing the most cost effective portions of the house.
Real Estate Wholesaling
When looking for income generating assets, a real estate investor can look into real estate wholesaling. Real estate wholesaling is confusing at first, but we’ll try our best to explain it. Real estate sellers looking for a quick sell without investing into repairs will go to a wholesaler. The seller and the wholesaler will agree on a value to sell the property. Once this arrangement is complete, the wholesaler will make a profit by finding a buyer who will pay a higher value for the same property. The real estate wholesaler is essentially paid money to help you (the investor) find a good investment property. This property can generate money as a a fix and flip project or a fix and rent property. Ultimately, the investor finds a property quickly and at a discounted rate.
Making money in real estate with income properties comes down to the approach each investor takes to manage the property. Before beginning to make money in real estate investing, the investor needs to decide on how much time he/she is willing to commit to his/her income properties. The more time an investor is willing to commit, the more income he/she will generate. There are many avenues and approaches to take. Airbnb rental income, traditional rental income, and fix and flip, to name a few, can all be done with assistance through companies, thus limiting the stress. Or by learning through experience. Lucky for you, we here at Mashvisor have immense knowledge and experience on the matter and can help guide you through this journey! Don’t forget to sign up for our 14-day free trial now.