[vc_row][vc_column][vc_column_text el_class=”help_line_content”]There is a lot of money to be made in real estate \u2014 which is why it\u2019s popular with a variety of investors. Whether you are trying to build passive income or kick off a full-time investing career, there are numerous ways to find success and make money.<\/p>\n
However, the question is: what exactly are the best ways to make money in real estate? Is making money in real estate as complicated as it sounds?<\/p>\n
Let\u2019s review\u00a0how to make money in real estate<\/strong>\u00a0first, and identify the best strategies for investors ready to get started.<\/p>\n Thinking about investing in real estate; it\u2019s a good idea to learn from the experts, and registering for a seminar or short course is a great place to start.<\/p>\n <\/p>\n There are generally four different ways to make money in real estate:<\/p>\n Before you get started, consider a few different things:<\/p>\n By answering the questions above, you\u2019ll have a better idea of which types of real estate investments are suitable for you.<\/p>\n The most common way to make money in real estate is through appreciation. Appreciation is when a property grows in value.<\/p>\n You might purchase a property for $400,000, and over the course of 10 years, it appreciates to a value of $700,000. Sell the property, and you\u2019ll have profited $300,000.<\/p>\n Most properties tend to appreciate, and that\u2019s why real estate is such a popular industry for investors. There\u2019s an excellent chance that your property will eventually be worth more than what you bought it for much more.<\/p>\n Let\u2019s talk about land first. \u201cLand\u201d is any property that has few or no existing structures. Land tends to appreciate for two reasons:<\/p>\n Residential and commercial properties appreciate for three main reasons:<\/p>\n Don\u2019t forget to\u00a0account for inflation<\/a>\u2014how prices increase over time. Inflation will cause your property to be a little less profitable than what you\u2019re selling it for.<\/p>\n For example, your property may have appreciated by $200,000, but the average home price may have increased by $70,000 over the same period.<\/p>\n Keep this in mind when you\u2019re trying to calculate your returns on a prospective property.<\/p>\n Always discuss the potential rental income with your chosen real estate agent who will introduce you to the property management team in their agency.<\/p>\n <\/p>\n You\u2019ll earn a one-time profit when you sell an appreciated property. But many real estate investors use their investment properties to generate a steady cash flow. You can generate regular income through residential properties, commercial properties, and vacant land.<\/p>\n When you own a residential property, you can\u00a0rent out to tenants<\/a>\u00a0and collect monthly rent. You need to collect enough rent to cover the property costs, like mortgage payments, utilities, and property taxes\u2014and you might even be able to collect a little extra that you can pocket. This is noy always the case as you may have to contribute a little of your own money that may give you some positive taxation considerations, this is called negative gearing.<\/p>\n Similarly, you can rent out\u00a0commercial properties<\/a>\u00a0to businesses. With commercial properties, you could make additional money by offering your tenants contractual obligations. \u201cFirst right of refusal\u201d is a popular one: when a business rents out space on your property, they can pay you to grant them a first-option on an office space that opens up next door. This is a helpful contract for growing businesses, and it\u2019s a good way for you to avoid prolonged vacancies. Also, with commercial leasing the tenancy agreement is usually a lot longer than a residential lease period.<\/p>\n With residential and commercial properties, you need to strike the right balance between price and desirability. You need to charge rent that\u2019s high enough to cover your expenses and turn a profit, however, as mentioned previously a small contribution by you may be required in the short term. Similarly, the rent needs to be reasonably proportionate to the property\u2019s quality. If your rent is too low, you could lose money. And if your rent is too high, you could suffer from extended vacancies\u2014which are even more costly.<\/p>\n You can generate regular income from raw land, too. They can rent out your land to harvest resources, in which case they\u2019ll pay you royalties on their profits. A business can rent out land for production purposes\u2014most rented land is used for agriculture.<\/p>\n \u00a0<\/strong><\/p>\n Residential properties offer a variety of ways to make money. Whether you want to generate monthly income or one-time revenue, different options can suit your needs. The best residential strategy often depends on your preferred level of involvement \u2014 though they all require a certain level of research to be successful. Here are just a few different ways to break into residential real estate:<\/p>\n This is the most popular investment strategy for residential real estate. As mentioned in the previous sections, you can buy a property and hold it until it appreciates, or you can rent it out to tenants.<\/p>\n You don\u2019t have to own a separate property to buy and hold, either. You can use this investment strategy to make money at your primary residence. You can rent out rooms in your house (a great way to collect extra money for the mortgage payment), or if you own a multi-family home, you can live in one unit and rent out the others.<\/p>\n When you rent out a property to tenants, you\u2019ll become the de-facto landlord of the property. You\u2019ll have several landlord obligations to fulfill, including hiring contractors to do maintenance tasks when needed (you\u2019re the one who\u2019s got to hire the plumber). Be kind to your tenants and keep them happy \u2013 your property manager will, in most cases, take care of these issues under the leasing agreement with the agent.<\/p>\n Property management companies are generally part of the real estate agency. Most property management companies will charge between 8-10% of your monthly rental income, but they\u2019re a godsend for investors who are too busy to handle landlord duties or screen new tenants.<\/p>\n Talk to your chosen real estate agent for their advice first.<\/p>\n \u201cHouse flipping<\/a>\u201d has become one of the most exciting types of real estate investments\u2014hence the large number of TV shows dedicated to them.<\/p>\n A fix-and-flip investment is when you purchase a run-down or low-valued property. Over a short period, you renovate the property to increase its value, and then sell it for a profit.<\/p>\n You can generate significant returns with a successful house flip, but they\u2019re challenging and not always suitable for beginning investors. You need to have a good sense of how much renovations will cost (the higher the renovation cost, the lower your profit margin) and how much those renovations will affect the home value.<\/p>\n If you buy a property in a desirable location for travellers, you could rent it out as a \u201cshort-term rental,\u201d also known as a holiday let. Holiday rentals are more popular than ever, thanks to websites like Airbnb. These properties can be tremendously lucrative investments, even when you\u2019ve accounted for cleaning costs and website commissions.<\/p>\n It\u2019s important to know that short-term rentals are being increasingly regulated, primarily due to the escalating housing costs\u2014many state and local governments are apprehensive about properties being held as holiday rentals rather than being used for long-term housing. However, that\u2019s up to you, it\u2019s you\u2019re dwelling.<\/p>\n Keep up with the housing laws in your local market so you\u2019ll know whether or not a holiday rental is a good proposition.<\/p>\n <\/p>\n There is a common phrase in the investing world that it takes money to make money, but that isn\u2019t always the case in real estate. Many real estate investors can start in wholesaling, even with low cash reserves. Wholesaling, and many other beginner-friendly strategies, allow aspiring investors to break into the industry without many resources.<\/p>\n That being said, you do need a strong work ethic and time to make money in real estate, especially in the beginning. If you want to wholesale, buy, or flip a property, you need to make sure it has potential. Furthermore, suppose you\u2019re going to work with a business partner or other type of private lender. In that case, you will typically need to do the heavy lifting in terms of market research, deal analysis, and, in some cases, property management.<\/p>\n There are a lot of misconceptions about what you need in the real estate industry. In most cases, it all comes down to how well you can understand the market, identify creative financing, and execute deals. As you gain experience, these factors become much easier, but try not to get discouraged early on.<\/p>\n Learn how to get started in real estate investing by attending lectures and seminars \u2013 a lot of these are free and can be online.<\/p>\n <\/p>\n Some real estate investments, like fix-and-flips and commercial properties, are too complicated for beginning investors. So, what are the best investments for those who are just getting started in real estate?<\/p>\n Here are six of the best ways for beginners to make money in real estate:<\/p>\n The single-family home is a tried-and-true real estate investment\u2014simple and effective. Rent out a single-family home to tenants and use the rent payments to pay for the mortgage.<\/p>\n Multi-family homes can generate higher returns, but they also require more capital to buy, and the transactions are complicated.<\/p>\n Single-family homes, on the other hand, are far more cost-effective and easier to manage. They also appreciate faster.<\/p>\n But don\u2019t just buy a single-family home anywhere. Location is always important. Do thorough research and ensure that the property\u2019s location will produce enough income to make a profit in the short term.<\/p>\n If you don\u2019t have the capital to buy an investment property, you can turn your primary residence into an investment property. Consider renting out rooms in your home to tenants and collecting rent from them\u2014you can use the rent to help pay your mortgage or save for a second property.<\/p>\n It\u2019s easier if you own a duplex or triplex, but you can still do this in a single-family home so long as you\u2019re comfortable having roommates. Also, consider renting out a guest house on your property or a garage (so long as it can be properly outfitted into a living space).<\/p>\n Smart, patient investors use this method to accumulate money to buy a second investment property.<\/p>\n A \u201cturnkey property\u201d is\u00a0real estate<\/a>\u00a0that a company owns. These companies typically manage an inventory of fix-and-flip properties that are sold to buyers.<\/p>\n Unlike traditional fix-and-flips, turnkey properties are less risky, and you don\u2019t have to worry about completing renovations under a strict budget and timeframe. The renovations are done for you. Turnkey properties are also easier to finance and can be purchased with a small down payment.<\/p>\n In summary turnkey houses are those, usually new homes that are ready to move into.<\/p>\n As mentioned earlier, a property located in a desirable location for travellers can be turned into a holiday rental. Airbnb is one of the most popular websites for listing holiday rentals, and it does a good job of vetting prospective renters and holiday makers and ensuring you get paid. If you want to learn more on how to turn your property into an Airbnb rental contact them direct \u2013 there are many on the internet.<\/p>\n Holiday rentals require more maintenance than long-term rentals. You\u2019ll need to thoroughly clean the property after each rental. Find a reliable and cost-effective house cleaning service that can perform these services for you if you don\u2019t have the time.<\/p>\n You can make a good profit on holiday rentals, but remember to research your local area\u2019s rules and regulations on these types of properties.<\/p>\nHow Does Real Estate Make Money?<\/strong><\/h3>\n
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1. Increasing Property Value<\/strong><\/h3>\n
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Inflation in Property Value<\/strong><\/h4>\n
2. Regular Income<\/strong><\/h3>\n
3. Residential Real Estate Income<\/strong><\/h3>\n
Buy and Hold<\/strong><\/h4>\n
Fix-and-Flip<\/strong><\/h4>\n
Vacation Rentals<\/strong><\/h4>\n
What Do You Need to Make Money in Real Estate?<\/strong><\/h3>\n
Ready to take the next step in your real estate education?\u00a0<\/strong><\/h4>\n
How to Make Money in Real Estate for Beginners<\/strong><\/h3>\n
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1. Invest in Single-Family Homes<\/strong><\/h4>\n
2. House Hacking<\/strong><\/h4>\n
3. Invest in Turnkey Properties<\/strong><\/h4>\n
4. Rent Out Properties on Airbnb or a managed complex or high rise.<\/strong><\/h4>\n
5. Manage Real Estate Properties<\/strong><\/h4>\n