Cash flow is king, but it’s not the only way of making money in real estate!
In the real estate investing business, we often hear about cash flow and how it is important when it comes to owning an investment property. While it’s true that cash flow is essential for a successful career in real estate, it’s also possible to make money in the business through other strategies. Thus, if your investment property is not generating rental income, don’t just quit investing – read about the 3 ways of making money in real estate investing without the need for cash flow!
If you’re interested in learning more about cash flow, we suggest reading “What Is Cash Flow and How Does It Let Real Estate Investors Make Money?”
#1 Making Money in Real Estate from Appreciation
Most real estate investors prefer investing in positive cash flowing investment properties because they can use the rental income to pay for expenses (like mortgage payments and taxes) and have an extra profit margin. What if we told you that you can make great profits from a rental property that is not cash flowing? How? Simply from real estate appreciation.
Real estate appreciation means the longer you hold an investment property, the more value it’ll gain. This allows you to sell it for a price much higher than the initial investment and reap great profits in the long-term. Another name for this is the buy-and-hold investment strategy.
Related: Buy and Hold Real Estate Is the Ultimate Investment Strategy: Here’s Why
Keep in Mind!
Making money in real estate through appreciation is not as easy as it sounds. First, appreciation doesn’t take effect in a year or two. According to real estate experts, property investors need to hold their investments for at least 10 years in order for it to gain real value. So, make sure you’re ready to hold the property long enough for this strategy to work.
Furthermore, a real estate investor needs to buy an investment property in a location that is currently considered undervalued but has a high expected appreciation rate in the long-term future. The best places to invest in real estate for high appreciation are those expecting major development plans, where land is becoming limited, and where the population is increasing.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Various other reasons can also affect the appreciation rate in a location, like when mortgage interest rates go down, demand for real estate increases, or there’s a lack of real estate supply. So, property investors planning on making money in real estate this way need to keep an eye out for these factors.
#2 Making Money in Real Estate by Investing in Fixer-Uppers
Rental properties are only one type of real estate. Another type is fixer-uppers – also known as the fix-and-flip investment strategy. This way of making money in real estate involves buying cheap properties that are distressed and need renovations, fixing and repairing them, and then selling them for a higher price as quickly as possible.
The best thing about this investment strategy is that it makes fast money. You also don’t need to worry about finding tenants, collecting monthly rent, managing the investment property, or any other responsibilities of the typical landlord.
Keep in Mind!
Fixer-uppers are considered risky investments in the real estate investing business! While there’s certainly a lot of money to be made here, it’s tricky when you don’t have knowledge or experience. If you don’t select the right property, you could find yourself on the losing end. So, if you insist on taking this route for making money in real estate as opposed to buying cash flow investment properties, ensure working with a good real estate agent who knows where to find cheap properties. Generally, it’s best to go for the ugliest houses in the nicest neighborhoods – that’s where the real value is.
Another thing to understand is your after-repair value. In other words, how much will the investment property be worth after fixing it? To accurately determine that, a real estate investor needs to have a strong relationship with a general contractor and actually tour the property on-site before making the purchase. So, before thinking of making money in real estate with fix-and-flips, make sure you study your financial situation and stick to your budget!
Related: Considering a Fix & Flip? Ask Yourself These 3 Questions First
The best way to find cheap investment properties is with a Property Finder Tool. With this tool, you can set your budget and the city/cities you want to find investment properties in. Immediately, you’ll see a list of the best properties in your location of choice and within your set budget! Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
#3 Making Money in Real Estate Through Wholesaling
What if you want to join the real estate investing business but you don’t have the capital to buy properties? In this case, wholesaling is your best option for making money in real estate. Simply put, wholesaling real estate is about finding a distressed seller and a motivated buyer and bringing them together. Thus, you’ll receive fast money without having to buy and repair an investment property!
Keep in Mind!
Just like with a fixer-upper, wholesaling real estate presents some risks. You first need to know where to find distressed sellers and identify homes that are behind on their mortgage. Additionally, finding buyers is also not easy and will definitely need good networking skills to find them every time you find sellers.
Moreover, wholesaling does not generate passive income like rental properties because once the property is sold, it stops making you money. Thus, if you want to rely on wholesaling for making money in real estate, it’ll probably become your full-time job. Is this something that interests you?
The Bottom Line
It goes without saying that there are many routes for making money in real estate investing besides cash flow. Nonetheless, in order to really succeed with these investment strategies, a real estate investor needs to use the right tools that enable him/her to find the best investment properties in the right locations. This is what we’re here to help you with!
Sign up with Mashvisor and get full access to our investment property calculator and property finder tool – the ultimate tools to search for and analyze investment properties in any city and neighborhood across the U.S housing market! Do you have questions about Mashvisor? Click here to read our FAQs and learn about our tools.
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