The most common phrase you’ll hear when telling people in real estate investing about your intentions to join the business is, “It’s easy to be making money in real estate”. That phrase is a double edged sword. On the one hand, it serves to motivate and assure potential real estate investors that odds are they will find success in real estate; however, on the other hand, it doesn’t show the picture of what it takes to make money in real estate. Sure, it might be easy or easier for those who have years of experience in the real estate market. They probably know by now about what works and what doesn’t to become successful in this type of business. For inexperienced real estate investors though, the path to making money in real estate is entirely different.
There is one simple and undeniable truth when it comes to investing your money in the real estate market: the chances of anyone making money in real estate are high. However, that will happen only if the investor is able to understand the market, how it works, and what exactly is needed in order to succeed. No one can just succeed instantly in investing in rental properties (unless they are crazy lucky); it’s a process that needs time and experience to master fully.
The one feature that differentiates real estate property investments from all others is the diversity of ways for making money in real estate. Think about the many options that an investor can pursue in real estate and how that diversity appeals to all types of real estate investors. Now consider that the following short list as a benchmark for making money in real estate:
- Buy Cheap, Sell High: There are some real estate properties that are up for sale for a value that is lower than the average market price. These properties basically represent an instant profit to its investor. For example, a real estate investor purchasing a property for $150,000 when its actual market value is above $200,000 is considered making money in real estate instantly.
- Traditional Rental Income: Those who understand the real estate market and how it works understand that rental properties are one of the most lucrative investing options in real estate. This sort of investment will require experience, dedication, and time on the part of the investor for it to work consistently.
- Short-Term Rentals: Consider Airbnb and its competitors for that type of investment. Making money in real estate is almost certainly guaranteed if an investor decides to pursue the more daunting and demanding task of short-term rentals. It generates more rental income per month and it is highly in demand as a direct replacement for the hotel industry.
Related: Real Estate Investing: Traditional vs. Airbnb Investments
These are just some of the ways any person can be making money in real estate. Nevertheless, is that considered enough? Knowing about different strategies is surely an asset, but it’s not a quality that makes or breaks an investment property.
5 Tips for Making Money in Real Estate Investing
1. Ease Into the Real Estate Business
One thing is certain when it comes to inexperienced real estate investors who are just starting out in the real estate business; don’t put all your eggs in one basket. In other words, just because you have decided to become a real estate investor, it doesn’t mean that you should quit your day job and become convinced that real estate is an easy money making way out. It is possible to be a real estate investor as a part-time job because mainly it is not hard labor. For most investors, having two incomes from their day jobs and their rental properties has proven to be a smart and easy choice to implement.
2. Choose the Right Strategy
You can’t be making money in real estate if you hate what you are doing with your investment property. There many different investment strategies in real estate that will suit some people more than others. Some of these strategies include fix-and-flips, rental properties, and buy-and-hold investments. Depending on the type of real estate investor that you are, you should choose the investment strategy that works best for you. Some people are just not cut out to become landlords of rental properties and having to deal with tenants. Meanwhile, others don’t have the ability to be creative and innovative to fix-and-flip a property in order to make more money out of selling it for profit. Choose a real estate investment strategy that will accommodate your strengths and neglect your weaknesses.
Related: How To Pick The Best Investment Property Strategy For You
3. Learn from Successful Investors
When it comes to making money in real estate, pride and ego should not be a part of your thinking process. It is true that many real estate investors like to do things in their own way. However, that comes after years of experience at the very top of the industry. For beginners it’s an entirely different story, because there is so much need for knowledge and understanding of how things work. Following in the footsteps of a successful investor you know or hiring a real estate agent (mentor) is a necessary step to find a smoother way to success.
Related: 5 Skills Needed in Real Estate Investing
4. Have Patience and Perseverance
The nature of the real estate requires investors to continue learning about the market trends and about their own investment through observing. Of course, real estate is not a get-rich-quick scheme, so patience is required. It will take time looking for resources, closing deals, making the investment, and managing the rental property, but the rewards are worth it.
5. Pay Attention to Management and Communication
Networking is absolutely important for real estate investors, especially for beginners. You will need a real estate network of different team members to gain new opportunities, assistance, and knowledge about making money in real estate investing. As a real estate investor, you will be required to make different decisions, ranging from banking to renovating. It’s a lot easier if you already have a team to consult. In addition, you should know how to accurately communicate when screening and dealing with potential tenants. Since legal compliance is a big part of being a landlord, know how to be firm with tenants when necessary without breaching any laws. Having proper communication skills is also important when it comes to negotiating closing costs or hiring labor.
Making money in real estate is achievable for any person who has the dedication and capacity to learn and adapt to the conditions of this business. The rewards of real estate investing are worth the trouble and effort you will be going through initially in order to achieve the profit that is within your grasp.