How to Make Money in Real Estate

One of the smart investments you should have in your portfolio is a real estate investment. Real estate investment has to do with buying, selling and leasing properties. Over the years, this investment option has proven to be profitable. The real estate industry being a billion dollar industry has produced more millionaires than any other industry apart from tech. The good thing is that you can venture into real estate and start making money in no time. This post outlines various ways to make money in real estate.

Benefits of Investing In Real Estate:

These are some of the reasons why you should venture into real estate investment,

a. High Returns: You get to enjoy high returns on investment when you invest in real estate. Little wonder many investors get to make their first million dollars from real estate investment.

b. Low-risk: The real estate investment is risky, but when compared to other investment options like stocks, it has a lower risk. That means you are most likely to lose your capital investing in stocks than real estate. But you have to understand how the system works to become a profitable investor.

c. Enjoy Tax Benefits: There are some tax benefits you enjoy from your returns as a real estate investor. For instance, you get to deduct money spent on improvements from your tax. Also, you can get a tax discount on interest from real estate investment.

d. Easy to Start: You don’t need any advanced skills or college degree to venture into real estate investment. All you need is basic knowledge of how the real estate industry works, how to spot good deals and sales skills.

e. Low Startup Capital: Most people think that you need hundreds of thousands of dollars to venture into real estate investment. In reality, all you need most times is less than a thousand dollars in down payment to start your first real estate deal.

f. Source of Passive Income: You can earn passive income from rentals in real estate. All you need is to find properties and rent to people in exchange they pay monthly rent.

Also read: Difference Between a Real Estate Broker and an Agent

How to Make Money in Real Estate:

These are some of the ways you can start building your real estate investment. It is best to look at the entire options and know which one that fits your interest and capital.

  1. Renovation and Flipping:

This is about the most popular way to venture into real estate investment. Various real estate reality shows popularized the renovation and flipping method. With this method, you buy a property for a lower price. Usually, properties in this range need some renovations. That is why they tend to sell for a low price. You spend a couple of thousands doing the improvement on the property after which you flip for a higher price. Let’s assume you the property for $25,000; you spent $8,000 on renovations and flipped for $45,000. That is a cool $12,000. When calculating your capital gain tax, remember to include the amount you spent on improvements and renovations.

  1. Resident Rentals:

Another way to make money from real estate is to acquire residential properties and rental out. Residential rentals can be a source of passive income if done correctly. Imagine having five apartments which you rent out to 5 people at $800 monthly rent. If you intend building a source of income in real estate that will continue to earn even after the initial work, then you should consider resident rentals.

  1. Vacation Rentals:

This is similar to resident rentals, but the client base is people looking for vacation spots. Millions of people in the United States alone take a couple of weeks each year for vacation, and they usually need rentals. You can venture into vacation rentals and earn passive income. The downside of venturing into vacation rentals is that it is slightly seasonal.

Also read: Understanding Capital Gain Tax On Real Estate

  1. Outright Sales:

You need a bigger capital to venture into outright sales. For outright sales, you buy a property for a sum; hold the property for a couple of years and sell at a much higher price. The outright sales in real estate can earn you the highest returns if done right. The downside is that your money is tied down for a couple of years until you meet a buyer that meets your minimum price.

  1. Money Lending:

You can also invest in real estate indirectly without having to buy or sell a property yourself. Most people that invest in real estate do source for loans to fund the investment. You can lend money to individual real estate investors and earn money from interest. This can also be a source of passive income if done right. The downside is that there may be right of default in payment.

Also read: Investment Plan: How to Create an Investment Plan

  1. Investment in Commercial Development Firms:

This is another indirect way to invest in real estate. There are commercial real estate developers that specialize in building real estate in commercial scale to sell or lease. You can invest in any of these commercial development firms in exchange for equity in the firm or interest.

There are other ways you can invest in real estate, but these methods are easy to start.