Four Proven Methods of Making Money Through Real Estate
Real estate provides you with powerful new tools to rapidly scale your wealth. Not only does real estate work well with inflation, but its value also continues to grow, and so does your ability to generate cash as a landlord.
But investing in real estate requires a sizable chunk of change, which can be off-putting to most serious investors. With that said, there are alternative ways of investing in real estate – and generating a decent profit from it. Here are the proven ways of making money through real estate (traditional and alternative methods).
Buy an Investment Property
The most effective way of making money in real estate is to buy an investment property. You could start with any home and rent it out to tenants. You can invest in a multi-unit rental property or a small apartment building if you have the startup capital. This will generate a steady supply of cash flow for the foreseeable future.
You can also cash in on the tourist market by investing in a vacation rental for short-term tenants. This will generate a reliable chunk of change when the tourist season is in full swing.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are a novel concept that took off very recently. It’s a special type of business that invests in real estate assets. Think of it as a type of mutual fund for real estate investors. It works by crowdsourcing wealth from investors to buy several real estate assets. REITs are also traded in real-time, just like the stock market, making it easy to buy and sell.
It’s easy to get started with limited capital. Just make sure to do your research before choosing the right company. The good ones can pay consistent dividends, making them ideal for investors who want a steady income.
Not ready to become a landlord? Don’t worry. You can still invest in real estate and make a decent profit while you’re at it.
Here’s how it works. You buy a rundown residential property, complete repairs, and then sell it for a profit. This method does require more time and investment because you need to have a good knowledge base of repairs. You should also have the contact numbers of contractors nearby, such as electricians, carpenters, and interior designers.
You could do everything yourself, but it will require more of your time.
How much will the unit be worth once you’ve spent your time repairing everything? This depends on the type of renovations you’ve made and other factors.
Pro tip: Work on your relationship with local contractors to lower the price of renovations and improve your margins.
This occurs when the current homeowner is behind on their mortgage payments, but the unit hasn’t entered foreclosure yet. This requires all parties (including the bank) to agree to the transaction since the property is being sold for less than is owed on existing mortgages. Short sales are a good opportunity for investors to make a quick profit without spending time and money on lengthy renovations.
This can be a tricky process because you will usually have to pay for the homes in cash. Unfortunately, this is the realm of seasoned investors. New home buyers may find the inspection and review process too difficult (and therefore, risky). The profit you can make from this transaction can be instantaneous and run into the tens of thousands.
Success largely depends on how badly the lender (usually the bank) wants to get rid of the property. They may decide to sit around and wait for another property if your offer is too low.
Investing in real estate is more accessible due to REITs and crowdfunding. Other ways of sharing the burden of investment are to enter into real estate limited partnerships and buy real estate investment trusts.
It’s worth mentioning that real estate can be difficult to liquidate (sell) and convert into cash. This is why you should always think of real estate as a long-term investment. If you need something easier to liquidate, consider other investment options such as stocks and even cryptocurrency.
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