There’s no doubt about it, investing in real estate is one of the best ways to make money. But there are so many kinds of real estate investments you may be asking yourself which ones are the most lucrative. Worry no more, here are the best ways to make money in real estate:
1.) Long-term Traditional Real Estate
Good ol’ traditional real estate. Traditional real estate may be the most common form of real estate, but it still is one of the best ways to make money in the industry. The method may be common, but the properties of traditional real estate are diverse. Anything from renting out a room to college students to purchasing and managing single-family homes are great ways to earn rental income. The leases for long-term real estate are usually over a month, which helps ensure stability and regular cash flow. This is especially true when housing great tenants. To find traditional properties with high cash flow, use Mashvisor’s property search!
2.) Commercial Real Estate
Not into becoming a landlord? That’s fine, there are still plenty of options available. One of them, which happens to be one of the best ways to make money, is through commercial real estate. Instead of renting to individual tenants, you rent to businesses. As you could expect, the cash flow is higher than in traditional real estate. Unfortunately, that isn’t the only thing that’s higher. Vacancies are more likely in commercial real estate. As with any kind of real estate, be aware of your local laws.
3.) Real Estate Crowdfunding
Real estate doesn’t have to be a one-man show. If you want to invest with many partners, real estate crowdfunding could be for you. Finding real estate partners is not too hard either, as many websites have been formed specifically dedicated to crowdfunding. Multiple investors pitch in small amounts of money to work on a real estate project. Options are plentiful and brainstorming among many real estate professionals will definitely be an advantage. However, risk can be pretty high, and if the housing market worsens, investors can lose money. But hey, there’s bound to be risk with any business, right?
4.) Fix-and-Flips
Real estate investors, perhaps more experienced ones, looking for a challenge should consider fix-and-flips. These real estate investments are active and short-term. An investor buys a real estate property, renovates it, and sells it, A.K.A. “fixing” and “flipping” it. This real estate investing strategy can be challenging, and the longer an investor fixes a property, the more monthly expenses will pile up. Still, when done correctly, it is one of the best ways to make money in the world of real estate investing. The trick here is to find great deals. That should help in making some serious money.
5.) Buy-and-Hold Real Estate
Buy-and-holds are just what they sound like. A real estate investor purchases a rental property and holds it for a long time. Although this real estate investment is a long-term one, it is still a passive investment. Gains through buy-and-holds are mainly through appreciation and cash flow, if you decide to rent the property out. Therefore, the best cities for this strategy are those with great appreciation and high cash flow. You definitely can’t go wrong with buy-and-holds.
6.) Real Estate Wholesaling
Real estate wholesaling is one of the best ways to make money when executed properly. This strategy is essentially a fix-and-flip, without the fix. A wholesaler contacts a seller and then markets the property for sale. Once the investor finds a buyer, the contract is assigned to the buyer. As it sounds, this method doesn’t require much money to do, so it’s great for beginners. Planning, however, is extremely crucial. Track good sellers, don’t just settle for anyone looking to get rid of a real estate property.
7.) Turn-Key Real Estate
Next up on the list of the best ways to make money in real estate is turn-key properties. These are properties that save time and energy, as they are ready to be immediately rented out after being purchased. This is a great idea if you’re looking for out-of-state investments. Stress isn’t the only thing that is reduced with turn-keys, but so is risk. That’s because the rental properties are already fixed, by professional companies, so the investor does not face much risk. There are two main downsides to turn-keys, however. One is that they don’t increase in appreciation. Also, the price of turn-keys can be hefty.
8.) REITs
REITs, or Real Estate Investment Trusts, are one of the best ways to make money in real estate investing. As a form of passive investment, investors buy shares of a company (the REIT) that invests in real estate projects. Like turn-keys, investors profit from high rental income. Unlike turn-keys, REITs benefit from real estate appreciation. Tax rules for REITs are simple, which is a plus as some real estate investments can have quite complex tax concerns. Liquidity of REITs is also better than that of rental properties.
9.) Airbnb
If you’re into short-term renting and are looking for one of the best ways to make money in real estate, then check out Airbnb. Airbnb is an online short-term rental platform that allows hosts to rent our their real estate properties or parts of them to guests. Not only is renting through Airbnb becoming trendy, it is also an excellent way of making rental income. Most real estate investors see higher yields from Airbnb compared to the traditional rental strategy. The potential downside of Airbnb will depend on the location where you are investing. Some cities have tough rules towards Airbnb taxes and Airbnb zoning. Be aware of your city’s legal situation before planning to start with Airbnb.
10.) Vacation Rentals
And the final entry in the best ways to make money in real estate is vacation rentals. We’ve already mentioned Airbnb, which can be used as a vacation rental as well as a short-term one, but let’s focus solely on vacation rentals. By having a vacation rental in a popular tourist destination, you could earn a whole lot. As with Airbnb, be aware of local laws related to this real estate investment strategy.
There, the ten best ways to make money in real estate. Every strategy has its pros and cons, so be sure to find what works best for you. For more on all things real estate, visit Mashvisor!