According to U.S. millionaires, real estate is the best investment you can make today. From year-round income to the appreciation of assets each year, it’s clear to see why they say this.
Whether you’re seeking to add another source of income or expand your investment portfolio, real estate can be a suitable alternative for increasing your wealth. Fortunately, there are various ways you can make money in real estate. This may depend on your capital and expertise level. In this blog post, we’ve outlined various real estate tips to consider when investing.
Seven Ways to Make Money in Real Estate
Want to get into real estate investing but don’t know where to start? Here are seven popular ways to invest in real estate:
1. Buying Investment Properties
The most prominent method of making money in real estate is buying an investment property. You could purchase a vacation rental property and rent it out short-term. You could also buy a home and rent it out to long-term tenants. Alternatively, you can purchase a commercial property, such as an office building, and rent it to businesses to generate rental earnings.
Acquiring an investment property can be an excellent method to make money in real estate. However, we recommend having enough knowledge and expertise before you get started.
2. House Flipping
House flipping is a real estate investing strategy that centers on purchasing properties at a low price and then renovating to resell for a profit. However, this is an investment fitted for those with added expertise in real estate and remodeling. Note that every house flipping project has its own renovation budget. Your capability to assess and measure the renovation expenses may impact your buying choices.
3. Buying Turnkey Properties
A turnkey property is a property that an investor wants to sell fast. Issues such as financial emergencies or being unable to manage the property can force the investor to sell the commercial property with tenants in it.
Acquiring a turnkey property allows you to earn cash flow right away and saves you time. This is possible since it comes with tenants and saves you money that would have otherwise spend on marketing.
4. Wholesaling
Here, a real estate wholesaler acts as a broker between a property seller and a real estate investor. The broker identifies a low-priced property investment opportunity and agrees to buy the property. Afterward, the broker searches for an investor who’s prepared to spend a little bit more to buy the same property. The difference will be the broker’s profit margin. However, unlike the other real estate investments, wholesaling involves a lot of red tape and can be time-consuming.
5. Real Estate Investment Trusts
A Real Estate Investment Trust (REIT) is a company created to invest in real estate assets through investors. The company merges investors’ funds to acquire a property. REITs are great selections for amateur investors since they get traded on the stock market. Thus, they are easy to acquire and sell. What’s more, many REITs pay constant dividends. This makes them an excellent alternative for investors who want a steady income.
6. Refinance Your Mortgage
Applying refinancing strategies such as tapping into your home’s equity and using the cash to invest in more real estate can help save money and lower interest rates. By reducing your mortgage payment, you enable yourself to invest more in the property through renovations to increase property value.
7. Crowdfunding
Crowdfunding is a real estate investing technique where a professional investor identifies a chance to purchase a commercial property and looks for individual investors to raise some of the property’s buying capital. Afterward, the individual investors earn a percentage of the total rent amount as cash flow based on their investment. This is an excellent real estate investment since you won’t have to carry the responsibility of owning real estate yourself.
Things to Consider When Investing in Real Estate
Investing in real estate is no walk in the park. If you are thinking of venturing into this sector, there are a few factors you need to consider including:
Capital
Some real estate investments need large amounts of funding. Thus, you have to consider costs such as down payment, money for closing costs, renovation, and more when investing in real estate.
Liquidity
Liquidity refers to how fast you’re capable of selling an investment at a figure that’s fairly close to full market price. This is a major factor when investing in real estate.
Local Housing Market
It’s crucial to analyze your local real estate market, particularly if you plan to flip houses or purchase rental units. Local laws, prices, market conditions, and more can differ from state to state. We recommend that you hire a licensed real estate professional. This helps you determine whether your local market is suitable for you as an investor or not.
Knowledge
You don’t need a lot of knowledge to invest in real estate. You can buy your first real estate investment property without much information beyond the basics. However, techniques such as flipping houses and wholesaling are extremely competitive. We recommend that you have enough expertise before placing large stakes at risk.
Passive or Active Investments
It’s important to consider how much time you want to spend on your real estate investment activities. If you don’t desire to have any day-to-day involvement in the investment, investing in REITs or crowdfunding is the best approach. On the other hand, purchasing rental properties is a very hands-on technique and can feel like a part-time job.
Learn How to Make Money in Real Estate
In real estate, there isn’t a one-size-fits-all solution. There are numerous alternatives to make money in real estate. So, if you’re ready to explore your options our real estate investment options above guarantee to increase your cash flow and grow your wealth. Learn more about real estate from our blog.
