Content of the material
- 1. Leverage Appreciating Value
- 3. Become a Landlord to Make More Money in Real Estate
- 3. Real estate limited partnerships
- 7. Let your home while youre on holiday
- 6. Commercial Property Rentals
- 4. Contract Flipping
- 5. Make a profit from parking
- 6. Invest in your own home
- Free Mini-Course: Passive Income from 2-4 Unit Multifamilies
- 6. Make The Most Of Inflation
- What Do You Need To Make Money In Real Estate?
- Residential Real Estate: Paths to Profits
- Buy and hold
- Airbnb and vacation rentals
- 1. Increasing Property Value
- Inflation in Property Value
- Whats the Best Way to Make Money in Real Estate?
- 6. Vacation rentals
- 1. Online Real Estate Investing Sites
- How It Works
- What You Gain
- What You Risk
- 10. Rent Sections of Your Home
- Pro tip:
- The Role of Inflation in Property Values
- Final Thoughts
- How to Make More Money as an Investor
- 12 Ways to Make Money Investing in Real Estate
- 1. Residential Sales and Rental Income
- 2. Commercial Real Estate Sales and Rents
- 3. Real Estate Investment Trusts
- 4. Property Value Increase
- 5. Cleaning Services
- 6. Staging
- 7. Photography
- 8. Foreclosure Specialty
- 9. Property Management Company
- 10. Home Warranties/Inspections
- 11. Factory and Commercial Rehab and Design
- 12.A Combination of These
- 8. Commercial real estate
1. Leverage Appreciating Value
Most real estate appreciates over time. Appreciation means a home increases in value, sometimes without you doing anything. When a home appreciates, it automatically increases your equity, which is the difference between the home’s value and your outstanding mortgage principal.
How does a home appreciate? There are a few ways:
- Most properties appreciate over time. As the area increases in value, so does your home, allowing you to take advantage of the higher value.
- You can improve a property’s value by renovating it. Whether you make major renovations, like remodeling the kitchen or bath, or you fix up the home’s curb appeal, or install energy-efficient windows, you can increase a home’s value.
Continually improving your home’s value is an excellent long-term tactic to earn real estate income. It ensures you have a decent return on your investment, which helps you build your wealth further and faster.
3. Become a Landlord to Make More Money in Real Estate
A landlord is the owner of a property who rents it to a tenant. The primary benefit to purchasing a home and renting it out is that you generate passive monthly income and own an asset that is constantly increasing in value. It’s also one of the most affordable ways to get into real estate investing.
However, it’s no secret that being a landlord can be difficult and unpredictable—especially without the right tools, resources, and preparation. At the very least, you’ll need to know how to calculate the right cost of rent, how to screen tenants, and maintain the property.
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3. Real estate limited partnerships
A real estate limited partnership (RELP) provides investors with a diversified portfolio of real estate investment opportunities, allowing you to merge your funds with other investors’ to buy, lease, develop, and sell properties that would be hard to manage or afford independently.
Like REITs, RELPs usually own a pool of properties, but they differ in their structure and organization. Primarily: RELPs are a form of private equity — that is, they are not traded on public exchanges
Instead, they exist for a set term, which typically lasts between seven and 12 years. During this term, RELPs function like small companies, forming a business plan and identifying properties to purchase and/or develop, manage, and finally sell off, with profits distributed along the way. After the holdings are all dispatched, the partnership dissolves.
They’re generally more suitable for high-net-worth investors: Most RELPs have an investment minimum of generally $2,000 or above, and often substantially more — some set minimum “buy-ins” anywhere from $100,000 to a few million, depending on the number and size of the property purchases.
7. Let your home while youre on holiday
Going away? Why not consider letting your home to someone who’s in need of accommodation while you’re away? Depending on where you are and what’s going on around you, tidy profits can be made from short-term property lets.
Take our area, East London, as an example. During the 2012 Olympic Games, property rentals were fetching £5,000 per week. Imagine the holiday you could have with that amount of cash coming in!
6. Commercial Property Rentals
Commercial real estate is one of the fastest ways to make money in real estate. This means flipping properties and developing them, adding value to properties in order to increase their net incomes through renovations and upgrades. You’ll also consult on projects that might take more seasoned real estate investors to see to fruition.
4. Contract Flipping
One way that you can make money from real estate without having to put up very much capital or credit is to flip contracts. All you have to do is find a distressed seller and a motivated buyer, then bring them together.
While locating a distressed seller might seem difficult, Clothier has systemized the entire process for doing this. The trick with contract flipping is to identify the distressed seller and locate a ready-to-go buyer.
To do this, you have to be able to identify either vacant homes or homes that are behind on their mortgages. That’s the tricky part. You’re effectively trying to find distressed sellers, but homes that are already vacant are primed for an opportunity like this.
5. Make a profit from parking
Councils are making life more and more difficult for motorists, and you can capitalise on this if you have an unused driveway. This is especially true if you live in and around a city centre or have great transport links close by.
Your first reaction may be, ‘Is it worth the hassle?’. Well, the hassle-factor is actually quite low, and when you take a look at the returns you can get from sites such as parkonmydrive.com, you might just be persuaded to give it a shot.
Take a look at our article on how important parking is to a property’s value. In this post, we explain why you should definitely take off-street parking into consideration, even if you don’t own a car.
6. Invest in your own home
Finally, if you want to invest in real estate, look closer to home — your own home. Homeownership is a goal many Americans strive to achieve, and rightfully so. Residential real estate has had its ups and downs over the years, but it generally appreciates in the long-term.
Most folks don’t buy a home outright, but take out a mortgage. Working to paying it off, and owning your home outright, is a long-term investment that can protect against the volatility of the real estate market. It’s often seen as the step that precedes investing in other types of real estate and has the added benefit of boosting your net worth, since you now own a major asset.
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6. Make The Most Of Inflation
Real estate is one investment that hedges against inflation. Even when the value of the dollar decreases, property values usually increase or at least remain steady. They don’t crash like stocks typically do, which gives you greater leverage when you earn real estate income.
As the investor, you can increase your rent prices (upon lease renewal) to account for the higher prices in the economy, allowing you to make up for the dollar’s lower value.
What Do You Need To Make Money In Real Estate?
There is a common phrase in the investing world that it takes money to make money, but that isn’t always the case in real estate. Many real estate investors can start in wholesaling, even with low cash reserves or bad credit. Wholesaling, and many other beginner-friendly strategies, allow aspiring investors to break into the industry without many resources.
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. Further, suppose you’re 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.
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.
Residential Real Estate: Paths to Profits
Here is a closer look at some of the many ways that you can earn income from residential properties.
Buy and hold
This is one of the more traditional ways of earning income from real estate. There are a number of ways to accomplish this: You can buy a single-family home and rent it out; buy a multi-family home and live in one of the units while renting the others—ideally to cover the mortgage and your own housing expenses; or purchase a multi-family home and rent all of the units—either managing the property yourself or hiring a management company to handle renting units, collecting rent, addressing needed repairs, and so on.
Property flippers specialize in adding high-return fixes to houses in a short time and then selling them. Flipping can be lucrative if you know how to find properties to fix up, you have the necessary skills to do the renovations yourself or oversee a crew to carry them out, and you have a sense of a property’s underlying costs and potential value.
Airbnb and vacation rentals
The demand for home-away-from-home rentals had taken off in recent years as many travelers preferred this option to staying in a hotel. Homeowners could earn income by renting out a house or even just a room on a short-term basis, especially if the property is in area that's a well-known tourist destination. It's unclear when that market will return. But should it reappear, keep in mind that short-term rentals are regulated and sometimes even banned in certain cities. Check your city's bylaws before listing a property on a website such as Airbnb, VRBO, or HomeAway. And also figure in what additional deep cleaning and sanitizing between guests will add to the costs.
1. Increasing Property Value
The most common way to make money in real estate is through appreciation. Appreciation is when a property grows in value.
You might purchase a property for $400,000, and over the course of 10 years, it appreciates to a value of $500,000. Sell the property, and you’ll have profited $100,000.
Most properties tend to appreciate, and that’s why real estate is such a popular industry for investors. There’s an excellent chance that your property will eventually be worth more than what you bought it for.
Let’s talk about land first. “Land” is any property that has few or no existing structures. Land tends to appreciate for two reasons:
Development: Land may appreciate if you construct a house or commercial building. Or you could refurbish structures that are already on the land.
Natural Resources: If you discover gold or oil on your land, it will almost certainly skyrocket in value. You can also sell land rights to companies that wish to harvest resources off your land—typically, you can earn a percentage of whichever resources are collected.
Residential and commercial properties appreciate for three main reasons:
Location: This is the main reason residential properties appreciate. Properties are more likely to grow in value if they’re located by schools, commercial centers, scenic areas, or popular destinations.
Development: A property will appreciate if the surrounding neighborhood sees new developments or redevelopment (but a property may also decline in value if the neighborhood decays).
Improvements: A property may appreciate if significant building improvements are made. This is the main idea behind fix-and-flip investing.
Inflation in Property Value
Don’t forget to account for inflation—how prices increase over time. Inflation will cause your property to be a little less profitable than what you’re selling it for.
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.
Keep this in mind when you’re trying to calculate your returns on a prospective property.
Whats the Best Way to Make Money in Real Estate?
If you can stomach hearing no several times a day and maintain a constant follow-up file with all wholesale offers made, you will make more money in Real Estate than most “house flippers” you see on TV.
Money can be made in Real Estate in several different ways. I will never claim a particular technique is not worthy of your time. They all work, some just better than others.
The smartest and best investors do not focus their time solely on rentals or rehabs, and they never swing a hammer or do rehab work themselves.
The best and most successful Real Estate investors are the ones who focus on being transaction engineers and becoming masters of negotiation, relationships with other investors and accepting the fact that the real money is made in pushing paper, not hammering nails.
As you grow in your Real Estate investing career, you will always want a constant portfolio of different types of transactions going on at the same time. Some investors focus on one particular strategy and make a lot of money.
However, I would rather have the knowledge to take any deal that came my way and turn it into cash. I constantly have a steady stream of wholesales, lease options, rehabs, new construction, and anything else I can get my hands on.
As previously stated; all of these strategies (and many more I have not mentioned in this article) have their place and can make money fast. However, for the new investor, dead set to make the millions of dollars promised by the “Gurus,” focus on Options and Wholesale deals.
6. Vacation rentals
Vacation rentals can present a lucrative path to profits in the real estate marketplace. Not only can you make some side hustle income from vacation rentals, but you could potentially make a significant amount of money and build up a substantial passive income stream if you’re in a highly-trafficked tourist locale. Places like Los Angles, Miami and other tourist hotbeds are well known for having high demand for these short-term rentals.
I’ve long been a firm believer in the vacation rental market. The best part? You don’t even need to own the properties to make money. Some of the world’s most successful property management companies that specialize in vacation rentals don’t actually own the homes but do provide a high-end consumer experience.
How do you participate? Leverage existing relationships with owners in your area. Network with others. Build bonds. Create systems. Ensure the upmost satisfaction. Go above and beyond for anyone staying at the homes you manage. And see how you can help to take some of the time and stress off of the present owners’ existing rental businesses. If you have a property, list it on a site like Airbnb, HomeAway or FlipKey before managing vacation rentals for other owners.
1. Online Real Estate Investing Sites
Online investing sites have changed the game in recent years. With these sites, you can own fractional shares of real estate projects. What this means is that you can get exposure to real estate, but you don’t need to come up with huge sums of capital or deal with tenants. This is a strictly passive income strategy.
For other sites, you must certify that you have a net worth over a certain amount or make a certain amount of money per year.
How It Works
With Fundrise, you can start with as little as $500. You open an account and select from a number of portfolio options. Fundrise charges a management fee of around 1% per year, which is fairly low compared with other options, and its 2021 annualized return was 22.99%! You can see how my Fundrise account has performed here.
What You Gain
Investing this way, you gain a ton of freedom and you gain exposure to the real estate asset class with very little money or effort.
What You Risk
You don’t get to really use any local expertise you may have, and you don’t necessarily get the pride that comes from visiting a real estate project that you wholly own, improve, and can see easily. For some people, that’s a big draw to investing the old-fashioned way!
Get Started With Fundrise
10. Rent Sections of Your Home
You don’t necessarily have to purchase separate properties to benefit from having rentals. Try a method called “house hacking,” which basically means renting out a portion of your property to offset your own living expenses. Make sure to check your local regulations before trying this hack as some areas have zoning restrictions that prohibit renting out portions of your property.
For example, you could purchase a two-bedroom condo and rent out one of the rooms. Alternatively, you could purchase a multifamily property, live in one of the units, and lease out the others. If you’re looking to build your real estate portfolio with minimal upfront costs, house hacking is a great way to gain experience with landlords and property management.
Airbnb listing for a private room in a shared home
You can even use house hacking to create a short-term rental experience. List your room or space as a “shared home” to open it up for short-term visitors. Short-term rentals can usually charge a higher per-night fee, but keep in mind that you aren’t guaranteed bookings. Make sure to list your space on Airbnb to generate a higher level of traffic and start gathering reviews.
Pro tip: If you don’t have any space inside your home to rent out, think about building a separate living unit or accessory dwelling unit (ADU) on your property. If you have land, you can purchase or build a small one-bedroom apartment and make your investment back quickly with renters. Before hiring a contractor, make sure you’re familiar with the laws and restrictions in your state.
The Role of Inflation in Property Values
When considering appreciation, you have to factor in the economic impact of inflation. An annual inflation rate of 10% means that your dollar can only buy about 90% of the same goods the following year, and that includes property. If a piece of land was worth $100,000 in 1970 and it sat dormant and undeveloped for decades, it would still be worth many times more today. Because of runaway inflation throughout the 1970s and a steady pace since, it would likely take more than $700,000 to purchase that land in 2021, assuming $100,000 was fair market value at the time.
Thus, inflation alone can lead to appreciation in real estate, but it is a bit of a Pyrrhic victory. While you may get five times your money due to inflation when you sell, many other goods cost five times as much to buy too, so purchasing power in your current environment is still a factor.
You can make money from real estate in countless ways. But start with the ideas above as you explore how to make money in real estate investing.
If you don’t know where to begin, try investing $10 in Fundrise or Groundfloor to start building a real estate investment portfolio. Everyone has $10, and just the act of creating an account and investing a few dollars will help you start down the path of making money with real estate.
You can scale up from there as you see fit, but the important part is taking the first step.♦
Which ways to make money with real estate appeals to you the most? Why?
How to Make More Money as an Investor
- Network with local business owners.
- Develop an interactive website and social media presence.
- Diversify your holdings.
- Self educate – learn about maintenance and marketing.
- Never stop researching the local real estate market.
12 Ways to Make Money Investing in Real Estate
This is a fact. Smart people who do their research will make money in real estate.
Real estate investing takes many forms:
1. Residential Sales and Rental Income
You can buy properties such as condos and homes and become the landlord who leases them to generate income. Long term residential rentals can become a substantial passive income stream.
Or you can buy properties that are in need of repair, do the repairs, and resell them. This is often called Flipping.
The term Flipping implies that the transaction is a quick, easy task, but that’s often not the case. Whether you’re going to lease or resell a property, pad in extra time because renovations almost always take longer than expected. And are more expensive than expected.
2. Commercial Real Estate Sales and Rents
Don’t overlook the commercial side as a money-making rental property. Post-pandemic, many towns and cities are faced with a glut of empty commercial properties, from a closed restaurant or office complex to a factory or warehouse.
Similar to a residential property, these commercial spaces can be retrofitted to fit today’s market and you can begin to collect a monthly rent for each tenant.
For example, you can subdivide a large space into a number of smaller spaces and generate rental income from the small spaces. This type of venture lends itself to creative financing, such as real estate crowdfunding platforms. Entrepreneurs and other investors may back such a venture.
3. Real Estate Investment Trusts
Trusts are often set up to manage financial investments, but real estate investment trusts handle property – residential, commercial, or a combination. The real estate investment trust can be part of an investment portfolio, also regulated by the guidelines of the securities and exchange commission. Or it can be set up by a real estate investment group.
You’ll need an attorney who specializes in the field. As a property or properties are added to a trust, a new deed is created to reflect the new “owner” (the name of the trust). You will need a trustee who is responsible for property distribution if that become necessary.
An attorney or a certified financial planner well-versed in this field can investigate whether or not a real estate investor trust is a good investment strategy and the best way to structure your investment properties.
4. Property Value Increase
This is a Flip on a delay. For example, relying on research, you analyze how much an incoming new business will impact a local real estate market. If 700 jobs are to be created from a new industry, it stands to reason that those employees will need housing. The new business is slated to open in two years. You buy a property or property, planning to rent it or let it sit until the demand for housing increases. When the time is right, you sell at a profit.
5. Cleaning Services
It’s a relatively unknown niche in the house cleaning industry – houses that are new construction need to be cleaned, especially if the interior has been dry-walled. The dry wall seams must be taped and spackled, then sanded until smooth enough for painting. The dust from the sanding must be vacuumed and wiped clean before the builder’s punch list – finishing trim, painting, installing floors – can be completed.
Landlords may also need this service for properties that are in-between tenants.
A staging company uses a set of household goods such as furniture and accents (wall art, bedding, area rugs, etc.) to give a house a welcoming look. The company delivers and removes the items needed for staging.
This can be a face-paced business, as realtors ask for quick staging before an open house, for example. Staging is most often used to prep a house for a successful open house.
See Also: Shopify Has Real-Time Reporting for Your Online Store
We’ve all seen the images used to help sell a house. Showcasing a property with good photos takes a lot of time. Increasingly, realtors like to use drone footage to show the location of a real estate property.
8. Foreclosure Specialty
When a company becomes owned by a bank or other hard money lenders, it often becomes listed with a real estate company. But the foreclosed property may be cluttered with items the previous owners have left behind. It may also be dirty.
There are a couple ways you can make money by working with foreclosures:
You can become the management agency that cleans it up, readies it for sale, and keeps the grounds mowed or plowed until it sells.
You can be the person who buys a foreclosure as an investment property, to either rent or sell. There are investors whose entire real estate portfolio of rental real estate is comprised of foreclosure properties.
Typically, each real estate company will have one or two agents who handle foreclosures. This can be a slippery slope, as foreclosures may be complicated by liens on the property for back taxes or utility non-payments. You’ll want a good title search.
9. Property Management Company
A company can handle indoor or outdoor chores, or both. Duties can range from tenant screenings (credit and criminal record checks) to serious property maintenance (electrical, plumbing), and even rental income collected. Or a property manager can handle mowing, snow removal and other outdoor maintenance.
10. Home Warranties/Inspections
This is a great option for a retired contractor. Often property values are based on inspections, which detail things such as the type of electrical service, age of roof and windows, condition of foundation and more.
11. Factory and Commercial Rehab and Design
Many empty factories and other commercial buildings could thrive if retrofitted to be more up to date. Once you know your local market, you may be able to identify a need and fill it.
For example, such properties can become “incubators” or “hubs” for businesses which benefit by grouping. For example, an empty shoe factory can be sectioned to hold a couple restaurants, small commercial ventures and day care.
12.A Combination of These
A key to successful real estate investing is diversification. For example, you can combine staging and photography (and charge separately for each!). You can buy rental real estate from foreclosure stock. You can buy and prep the property with furniture and necessary household basics and use it for short term rentals or vacation rentals, such as the Air BnB or VRBO.
8. Commercial real estate
One of the great opportunities in real estate for making a considerable amount of money is to invest in commercial real estate. Commercial real estate developers focus not only on flipping properties but also on developing them, adding value to properties in order to increase their net incomes through renovations and upgrades. They also consult on projects that might take more seasoned real estate investors to see to fruition.
Ali Safavid, founder of 5209 Investments, says commercial real estate is one of the most lucrative sources for both income and profits in the real estate market. As long as you can find ways to add value to the exchange, investing in commercial real estate can be one of the largest income generators you’ll find.
People always need office space and retail to run their businesses. These physical locations are bread and butter in the real estate niche. As you grow, you can find ways to open up shopping malls, develop large scale buildings and more. But you have to start somewhere.