Of course, you can make investments in it, whether directly or indirectly. Real estate delivered the best returns of any asset class with half the risk of equities, according to research conducted over 145 years in more than a dozen nations. Alternative employment options include working for a real estate agency, title business, or property management organization.
Consider the following possibilities as a starting point rather than a complete list as you investigate How To Make Money in Real Estate.
How to Make Money in Real Estate: Direct Investment
Most people envision immediately purchasing and owning property when they think of real estate investing.
Consider the following real estate business opportunities if you enjoy the notion of owning property.
Real Estate Wholesaling
When you buy real estate wholesale, you flip the contract to buy the property rather than actually purchasing it.
Which makes it a strange spot to start a list of ways to directly profit from real estate. However, if they are unable to locate any purchasers, real estate wholesalers should be ready to purchase any property they place under contract.
This is how real estate wholesaling operates: you locate a fantastic price on a house that frequently needs maintenance. After placing it under contract, you locate another bidder who is ready to pay somewhat more than your agreed-upon amount. You transfer the contract to them and receive a margin or fee equal to the difference between the two prices.
Flip Houses
Everyone is familiar with the fundamentals of flipping properties. You purchase a property that needs work, make improvements to “force equity,” and then sell the finished house to a buyer.
Once more, it calls for the ability to locate excellent real estate offers. It also involves a variety of additional abilities, including working with investment property lenders, supervising contractors, negotiating with contractors, determining which house upgrades increase value, and being well-versed in the regional real estate market.
Buy and Hold: Long-Term Rentals
You’ve undoubtedly lived in a few long-term rentals yourself and are familiar with how they operate.
It follows the traditional landlord business model: you purchase a property and then enter into a long-term lease with tenants. You are required to keep the property in good condition, collect rent, and enforce the terms of the lease. If tenants fail to pay rent or otherwise violate the terms of the lease, you may need to issue eviction notices and go through the whole eviction procedure.
When looking for homes for the buy-and-hold strategy, investors often choose one of two paths. Some people invest in fully furnished rental homes that are either vacant or have tenants moving in. Other investors purchase properties that need work and employ the BRRRR approach, in which they rehabilitate the home and then remortgage it with a loan for long-term rental property.
It all depends on whether you’d prefer to get a better price in exchange for taking on the hassles of remodeling. Neither approach is better or worse.
Buy and Hold: Short-Term Rentals
Since the introduction of Airbnb, everyone is now familiar with how short-term holiday rentals operate. You can (almost) forget about evicting undesirable renters or pursuing rent arrears when you rent out your house to short-term visitors.
But there are other hazards and hassles associated with holiday rentals. You must successfully promote the property and have a high occupancy rate in order to avoid monthly losses. You must elegantly furnish and decorate the flat. Of course, frequent turnovers increase prices and labor since you have to clean the apartment between each visitor, change the sheets, and so on.
Start with this advice on how to become an Airbnb host if you’re interested in short-term rentals as a means to profit from real estate.
Invest in Mobile Homes
You could always purchase mobile homes instead of single-family residences or multifamily buildings.
They start off being much cheaper. Additionally, they frequently give better returns on investment and cap rates because they aren’t “attractive” assets.
Listen to our conversation with “The Mobile Home Gurl” Rachel Hernandez before you dismiss them. You could be pleasantly surprised.
Invest in Mobile Home Parks
As an alternative, you might put money into mobile home parks and earn money by renting out spaces to people who already own mobile homes.
Of course, purchasing a mobile home park is far more expensive than purchasing a single mobile home. But the business concept has several advantages, not the least of which is that you don’t have to maintain any homes!
Invest in Land
Beyond not needing to maintain any physical dwellings, land has its own benefits.
There is less competition since it’s not glamorous like parks and mobile homes. Higher potential returns for investors are therefore left, often exceeding 100% for any individual property.
Additionally, you will never again have to deal with disobedient renters or the phrase “Check’s in the mail!”
Check out this land investing case study and the REtipster land investing course if you’re interested. Seth Williams, one of the best investors and lecturers in the nation for land investing, has a relaxed, approachable teaching style.
Commercial Real Estate
Of course, you may purchase commercial properties, from little corner shops to imposing skyscrapers.
Various kinds of commercial structures include:
- Office space
- Retail space
- Restaurant and bar space
- Apartment buildings (any apartment building with five or more units is classified as commercial rather than residential property)
- Industrial space
- Self-storage units
The favorable laws for renters that apply to residential real estate properties do not apply to commercial real estate holdings (except apartment complexes). If your business renter defaults on their lease or violates your lease agreement, you may reclaim your property much more quickly without having to worry about anti-landlord legislation or ridiculously tight procedures.
Real Estate Syndications
You normally become a silent partner on a significant commercial property deal in a real estate syndication.
This is how it functions. The syndicator, a skilled real estate investor, discovers a great deal on a piece of business property, such as an apartment complex. They solicit funding from partners since they lack the funds to purchase the property outright. Even though they are a minority shareholder, the syndicator often has the partners’ approval to monitor the acquisition and maintain the property.
They receive a bonus that is included in the contract in return for their work.
A (relatively) inexpensive option to invest in significant commercial real estate projects is through real estate syndications. Unfortunately, only authorized investors may often engage in them due to how rigorously the SEC supervises them.
Fractional Property Ownership
Of course, you can create a joint venture with a real estate investor. For instance, you locate a seasoned investor and propose to contribute 20% of the acquisition price in exchange for 20% of the ownership.
In fact, we let some of our course participants collaborate with us in this fashion. Our Co-Investing Program provides real estate joint ventures, which is only available to participants in our FIRE from Real Estate course and other audience members who have closely collaborated with us.
Whether it’s a fixer-upper or a turnkey home, we locate it and put it under contract. We then invite those on our small waiting list, who have the option to work with us on the transaction if they so want. We allow a select group of people to work with us on these of our own real estate transactions for as little as 1% ownership.
In order to show our pupils how to profit from real estate deals, we started the curriculum. They don’t have to put down tens of thousands of dollars for a down payment, and they still receive the entire rental income and other advantages of owning rental homes.
How to Make Money in Real Estate: Invest Indirectly
Real estate investing doesn’t require you to make a direct purchase of the property.
In addition to purchasing homes, I also indirectly invest in real estate using the majority of the following methods.
Publicly-Traded REITs
A business known as a real estate investment trust (REIT) either holds a portfolio of real estate or makes loans backed by real estate.
They may be bought and sold right away since they are traded on open stock markets. Unlike the majority of real estate investment kinds, they are thus liquid investments.
Additionally, it renders them unstable, and share values are too tightly correlated with stock markets to allow for any type of substantial diversification.
However, the way the SEC oversees public REITs is both their greatest asset and worst liability. The SEC mandates that they distribute at least 90% of their annual income as dividends to stockholders. As a result, these funds have low growth potential and provide high dividend yields, as it is difficult for REITs to reinvest their earnings in new properties.
Private REITs
Some crowdfunding platforms for real estate provide their own pooled money, either of which is backed by real estate through ownership or debt. You may purchase shares in these private REITs directly from the real estate crowdfunding site, unlike publicly listed REITs.
That provides three significant benefits. Share prices aren’t very erratic, and they also don’t closely track stock markets. In other words, they truly diversify your stock investments.
Third, the SEC does not mandate that they distribute 90% of their income as dividends and instead regulates them differently. This gives individuals the freedom to reinvest gains, expand their portfolio, and thus increase the value of their shares.
Fundraise and Streetwise are my two personal favorite private REITs. While Streetwise purchases and operates commercial office buildings, Fundraise focuses mainly on residential and apartment complexes. Both accept non-accredited investors, while Fundrise allows you to join with just $10. Streetwise has a $5,000 minimum investment requirement but has routinely paid out substantial dividends in the 8–10% range since its inception.
Crowdfunded Real Estate Loans
You may invest in real estate through real estate crowdfunding in addition to private REITs.
Another strategy is to use investment properties as collateral for loans. You provide funds toward a specific loan that is backed by a property that a flipper is renovating. You will receive your money back plus interest when the flipper sells the home or, if they are using the BRRRR technique, refinances it. You receive your money back through foreclosure if the flipper defaults on the loan.
Groundfloor is my favorite illustration since it accepts non-accredited investors. You may start investing with as little as $10, contributing $10 to each loan that appeals to you. Additionally, it makes it simple to diversify by distributing your funds among a variety of loans.
The majority of real estate investments are long-term, but Groundfloor loans are not. Compared to other real estate possibilities, Groundfloor loans are a more flexible source of passive income because you normally get your money back within 6 to 12 months.
How to Make Money with Real Estate as a Career
There are other ways besides investing to profit from real estate. The real estate sector offers you the chance to build a successful career.
There are countless job opportunities, however, the following are some of the more typical methods to earn money in real estate:
- The 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
- The mortgage loan officer or account executive
- Mortgage processor or underwriter
- Hard money lender
- Real estate developer
