Knowing how to make money in the real estate industry takes a lot of hard work – but the hard work pays off. You can grow your wealth, hedge against inflation, and take advantage of a growing housing market with the proper steps. You might have seen or heard from a friend, relative, or on TV before and think it’s so complicated or that you don’t have time to learn. Here are some steps you can take to learn.
Below, we’ve identified seven ways to start boosting your income using real estate to your advantage. Let’s dive in and see how you can become a successful real estate investor.
1. Leverage Appreciating Value
Most real estate appreciates over time. Appreciation simply means that a home increases in value, sometimes without the homeowner making any changes to the property. 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?
Market Demand: As the area where your house is located becomes more favorable to buyers, so does your home, allowing you to take advantage of the higher property value.
Renovations: Home improvements can go a long way in terms of increasing your property value. Remodeling the kitchen or bathroom, enhancing curb appeal, and installing energy-efficient windows are examples of valuable renovations.
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 investment (ROI), which helps build your wealth further and faster.
2. Buy And Hold Real Estate For Rent
As a property investor, you have several options for investing in properties, including buying and holding real estate. When you buy and hold, you rent the property out to tenants. Here are a few ways you can take advantage of this strategy:
Long-Term Residential Investment Properties
Long-term residential rental properties are homes you own and rent to tenants for extended periods. These properties may be single-family homes or multi-family complexes. Lease agreements can be month-to-month or annual. When the lease agreement expires or your tenants leave, you are responsible for finding new renters.
Rental properties provide monthly cash flow. The rent you charge might cover the mortgage payment, property taxes, and homeowners insurance. The difference between the gross rent you charge and your housing costs equals your net proceeds on a rental property.
Short-Term Vacation Rental Properties
If you’d rather not deal with tenants year-round, you can invest in short-term vacation rental properties. The premise is similar to long-term rentals, but you rent to travelers for shorter periods. Platforms like Airbnb or VRBO can help attract potential occupants.
Owning a vacation home allows you to use it for your own vacations and rent it out when you're not using it. This can generate cash flow and help cover the cost of owning the home.
Land Rentals
If you own land but don’t have a property on it, you can still earn cash flow by renting out the raw land for purposes like storage or collecting wood. You might use this cash flow to build a property on the land, increasing its long-term value.
Commercial Spaces For Rent
Investing in commercial real estate is another way to earn a solid cash flow. You can rent commercial properties like office buildings, retail spaces, small businesses, and industrial properties to businesses. The tenants pay you rent, which you use to cover the mortgage and upkeep expenses.
3. Flip A House
Flipping houses is a great way to make a profit if you understand how it works. The process involves:
Buying an Undervalued Property: This could be a foreclosure or a home needing extensive repairs.
Repairing, Renovating, and Remodeling: Improve the property’s condition to increase its market value.
Selling for a Profit: Sell the property for more than the cost to buy and fix it up.
Flipping properties requires market knowledge and a careful evaluation of potential profits.
4. Purchase Turnkey Properties
Turnkey properties are investment properties sold with tenants already in place. This means you start earning cash flow immediately without having to find tenants. You save time and money by avoiding the carrying costs of owning a vacant property.
5. Invest In Real Estate Without Owning Property
If physical real estate isn't your preference, there are other investment opportunities:
Exchange-Traded Funds (ETFs) And Mutual Funds
Real estate ETFs and mutual funds allow you to diversify your investment portfolio without owning physical property. These funds are managed by professionals, providing an opportunity to earn extra income without the work of a landlord.
Crowdfunding
Real estate crowdfunding allows you to pool money with other investors to invest in a property’s equity or debt. This method offers a way to earn rental income proportionate to your investment without managing the property yourself.
Real Estate Investment Trusts (REITs)
REITs are publicly traded companies that own, operate, or finance income-producing properties. Investing in REITs allows you to earn a share of the income generated by commercial real estate without owning or managing properties.
Real Estate Investment Groups (REIGs)
REIGs are organizations of private investors who pool their money to invest in real estate. Working with a group can help secure better deals and make larger investments.
Real Estate Wholesaling
Real estate wholesaling involves finding real estate deals and selling them at a profit. Wholesalers buy properties below market value and quickly sell them for a higher price.
6. Make The Most Of Inflation
Real estate is an effective hedge against inflation. Property values usually increase or remain steady even when the dollar’s value decreases. As an investor, you can increase rent prices to offset higher prices in the economy, maintaining your income level.
7. Refinance Your Mortgage
Refinancing your mortgage can lower your monthly payment or allow you to tap into your home’s equity to invest in more real estate. Lowering your mortgage payment frees up your budget for other investment opportunities while tapping into equity can fund property renovations or new investments.
Other Strategies For Making Money In Real Estate
Investing In Short Sales
Short sales occur when homeowners sell their property for less than the owed amount with lender approval. Investors can buy these properties at a discount, then flip them for a profit or keep them as rental properties.
Purchasing Mortgage Notes
Investing in mortgage notes allows you to earn interest on a property’s debt. You essentially become the lender and receive monthly payments from the borrower.
Becoming A Personal Lender
If you have the capital, you can lend money to other investors or home buyers. You set the loan terms and collect payments, just like a traditional lender.
The Bottom Line: There’s No Single Path To Profit With Real Estate
Investors have many ways to make money in real estate, and there's no one-size-fits-all solution. Learning how to make money in real estate is one of the best ways to diversify your portfolio. Whether you prefer a hands-on approach or want someone else to manage your income streams, there are opportunities for all types of investors.
If you’re ready to explore your real estate investment options and want to buy a property to realize cash flow, start an application with V Nation Corp® today.
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