What Are the Best Ways to Make Money in Real Estate as a Beginner?

How to Make Money with Real Estate as a Career

Investing isn’t the only way to make money on real estate. You can also create a lucrative career in the real estate industry. 

While the career options are endless, here are a few of the more common ways to make money from real estate as a career:

    • Real estate agent (commercial or residential)
    • Real estate broker
    • Real estate marketing specialist 
    • Home stager
    • Real estate photographer
    • Property manager (commercial or residential)
    • Leasing agent (commercial or residential)
    • Real estate appraiser
    • Home inspector
    • Real estate attorney
    • Title officer
    • Settlement agent
    • Mortgage loan officer or account executive
    • Mortgage processor or underwriter
    • Hard money lender
    • Real estate developer
    • Jobs with REITs

All of these career paths complement real estate investing as a side gig as well!

3. Long-Term Rentals

More traditionally, long-term rentals are a common form of investment for homeowners. A long-term rental is typically 6 months or more – most commonly one year – and typically requires less upkeep on your day-to-day. Low inventory, excessive student loan debt, and the ever-growing millennial cohort create strong indicators for a strong and growing US rental market.

Your tenant signs a lease and is committed to paying monthly throughout the duration of the contract. This means you receive a stable flow of income for a set period of time, without having to worry much about the house unless it requires major repairs that the tenant is not responsible for per the terms of the contract. 

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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. 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.

7. Hard-money lending

Hard-money lenders provide short-term loans to people who normally wouldn’t qualify for those loans. In order to participate in hard-money lending, you’ll need some capital behind you. These are loans that are often at high interest rates because they’re for very brief periods. To close your first deal, you could turn to a hard money lender. If you have what you feel is a “sure thing” but lack the capital, this could be your best bet.

You could also become a hard money lender, but you’ll need some capital. This likely isn’t going to be the first way you start out making money in real estate, but as you build your network, capital and a solid portfolio of deals, you could provide these bridge loans and make a great rate of return.

Even if you lack an enormous amount of capital, as long as you can successful identify the right deals, provide a small amount of money and generate a high success rate, you can likely find investors to come on board without much difficulty. The interest rates here make sense. There’s more risk but also more reward. It can be a way to keep your cash fairly liquid and generate a nice profit in the short term without having to wait years and years for those returns to materialize.

4. Become a landlord

One classic way to invest in real estate is to buy a property and lease it, or part of it. Being a landlord can come in many forms.

The first is to buy a single-family home and rent it out, a strategy that will only generate income if overhead costs are low. If your tenant’s rental payment doesn’t cover the mortgage, insurance, taxes, and maintenance, you’re effectively losing money. Ideally, your monthly mortgage payment will be relatively fixed, while rent prices rise, increasing the amount of money you pocket over time.

Nowadays, you can shop for rental properties online through a site like Roofstock, which allows sellers of vacant homes primed for renters to list their properties, facilitates the buying process, and assigns a property manager to the new buyer.

Another option is “house-hacking,” which is when you purchase a multi-unit building and live in one of the units while renting out the others. This strategy decreases your living expenses while simultaneously generating income that can cover mortgage payments, taxes, and insurance. 

A low commitment version of house-hacking is to rent part of your home via a site like Airbnb, which would allow you some extra monthly cash without having to commit to taking on a long-term tenant.

On the opposite, more ambitious end, you could aim for a condo conversion, in which you buy a multifamily building, rent out the units, and then later turn the units into condos and sell them off individually, says Boston-based realtor and real estate investor Dana Bull. “So the idea is, you buy the building for a little bit of a discount, and then eventually you’re able to sell for top dollar,” she says.

3. Residential Real Estate Income

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 — 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:

Buy and Hold

Buy and hold” 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 could rent it out to tenants.

You don’t 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.

When you rent out a property to tenants, you’ll become the de-facto landlord of the property. You’ll have several landlord obligations to fulfill, including hiring contractors to do maintenance tasks when needed (you’re the one who’s got to hire the plumber). If you fail to perform those obligations on time, your tenants—in most states—are legally entitled to withhold rent payments.

If you’re only trying to develop a passive income, you might opt to hire a property management company to manage your properties. Most property management companies will charge between 8-10% of your monthly rental income, but they’re a godsend for investors who are too busy to handle landlord duties or screen new tenants.

Fix-and-Flip

House flipping” has become one of the most exciting types of real estate investments—hence the large number of TV shows dedicated to them.

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 you sell it for a profit.

You can generate significant returns with a successful house flip, but they’re 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.

Vacation Rentals

If you buy a property in a desirable location for travelers, you could rent it out as a “short-term rental,” also known as a vacation rental. Vacation rentals are more popular than ever, thanks to websites like Airbnb. These properties can be tremendously lucrative investments, even when you’ve accounted for cleaning costs and website commissions.

It’s important to know that short-term rentals are being increasingly regulated, primarily due to the escalating housing crisis in the United States—many state and local governments are apprehensive about properties being held as vacation rentals rather than being used for long-term housing.

Keep up with the housing laws in your local market so you’ll know whether or not a vacation rental is permitted.

7. Call Landlords to Get Listings

As the real estate market ebbs and flows, there will be times when it takes intentional effort to generate more buyer or seller leads. When you want to focus more on selling listings, one unique way to get listing leads is through landlords.

Landlords and real estate investors generally own one, if not many, investment properties, and they may be waiting for the right opportunity to sell. Of course, the best real estate sales come out of genuine relationships, so reach out to your network first—or expand your network and make more connections with investors.

Find landlords to call by using databases like Reonomy or sometimes Google. Treat them as a potential source of repeat or referral business, so don’t attempt to make a hard sale on your first cold call. In fact, it may take 10 to 20 calls or emails to get in touch with a busy landlord, but your first goal should be to schedule a meeting with them, whether it’s over lunch, coffee, or even Zoom.

Reonomy property ownership search

Reonomy property ownership search

Before the meeting, make sure you do your due diligence and already have a basic understanding of the landlord’s business. Look up what type of properties they own, how they market and rent them, and how they’ve worked with real estate professionals in the past.

This information is easily accessible on Reonomy, a commercial real estate database designed to help you discover and research properties and property owners. You’ll be able to easily search for specific addresses, property types, or by name to get contact information, and then run campaigns to reach them by mail, email, and SMS. Try Reonomy free for seven days.

Visit Reonomy

3. Flip A House

Flipping houses is a great way to make a profit if you understand how it works. To flip a house, you will:

  • Buy an undervalued property (such as a foreclosure or home that needs extensive repairs)

  • Fix the property up

  • Sell the property for more than the cost to buy it and fix it up

Since flipping a house takes several steps and requires careful evaluation of the market, it’s best for real estate agents who know the current real estate market or buyers who previously flipped homes.

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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.

By bringing these parties together, you’ve cut out the need to go hunting for a buyer after you’ve entered a contract. That situation presents more risk. Instead, by locating the sellers and the buyers beforehand, you can easily enter into a contract with the confidence that you won’t get stuck having to close escrow on the property. 

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. 

6. Go green

It’s now common knowledge that installing green technology can help us cut our bills and make us feel good about lessening our impact on the environment, but did you know that you can actually make money by doing so too?

The initial outlay to install solar panels, wind generators, ground source heat pumps and the like is quite high (up in the thousands), but it won’t be long before you get that back, as you’ll be able to sell electricity back to the National Grid whenever you have excess energy. This is on top of the fact that you’ll no longer be paying any electricity bills yourself, a saving that can easily run into four figures for larger households.

How to Make More Money as an Investor

  1. Network with local business owners.
  2. Develop an interactive website and social media presence.
  3. Diversify your holdings.
  4. Self educate – learn about maintenance and marketing.
  5. Never stop researching the local real estate market.

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

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.

Alternative Real Estate Income Sources

Real estate investment trusts (REITs)smortgage-backed securities (MBSs), mortgage investment corporations (MICs), and real estate investment groups (REIGs) are investment alternatives within the real estate sector. They are generally considered vehicles for deriving real estate income but they have varying processes for doing so and varying processes for entry.

REITs

With a REIT, the owner of multiple commercial properties sells shares (often publicly traded) to investors (usually to fund the purchase of more properties) and then passes on the rental income in the form of a distribution. The REIT is the landlord for the tenants (who pay rent) but the owners of the REIT record income once the expenses of operating the buildings and the REIT are taken out. There’s a special method to assessing a REIT.

MBSs, MICs, and REIGs

These are even a further step removed, as they invest in private mortgages rather than the underlying properties. MICs are different from MBSs in that they hold entire mortgages and pass on the interest from payments to investors, rather than securitizing portions of principal and/or interest. Still, both are not so much real estate investments as they are debt investments. REIGs are usually private investments with their own unique structuring, offering investors equity investments or partnership servicing.

Several credible real estate alternatives are available for making money in the sector but they come with varying caveats and entry points.

4. Rent a room

Let’s face it, the cost of living these days is putting pressure on a lot of people. Wages have been stagnant for a while, yet everything else continues to rise unabated. Renting out spare rooms, therefore, is becoming an increasingly popular option. 

While it may not be to everyone’s taste, taking in a lodger can bring in a handsome amount of cash. Plus, if you sign up to the Rent A Room scheme, you are currently allowed to keep the first £7,500 each year without paying any tax. Not bad!

7. Refinance Your Mortgage

If you have a mortgage on your investment property, you may be eligible to refinance it. Whether you refinance to take advantage of lower interest rates and save money, or you tap into the home’s equity and use the cash to invest in more real estate, you can use refinancing to your advantage.

If you lower your payment, you open up your budget, allowing you to invest more in the home, possibly making renovations to inject equity into your home. You can do the same if you tap into the home’s equity, using the cash to reinvest in the home, increasing its value.

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

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.

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.

New Venture Escrow Will Guide Your Real Estate Journey

Interested in the fastest way to make money in real estate? Buy your next investment property and don’t go at it alone! New Venture Escrow is your trusted escrow company. Our experienced team of escrow officers will ensure the closing process is smooth as possible. Contact us today to get started on your next real estate journey!

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