Smart investing is all about capitalizing on real estate opportunities and choosing the right real estate strategies, respective to the time and macro/micro conditions. Savvy investors know how to adapt their real estate strategy given real time economic conditions. Over time, they develop the skills to negotiate better deals, sell for higher profit margins, and buy/sell real estate at the right time for the right price. They learn how to diversify their real estate investment portfolio for the highest returns to maximize their wealth and mitigate their overall risk, especially during economic pitfalls.
Related: Proof That Real Estate Is the Best Way to Invest Money
How to Make Money in Real Estate: 8 Do’s
1. How to make money in real estate: Do invest in buy and hold real estate
Buy and hold real estate is the ideal long term investment strategy to safeguard passive income and accumulate overtime real estate appreciation. To make money in the buy and hold real estate strategy, investors must capitalize on positive cash flow properties reaping a surplus of cash returns to cover their monthly expenses, mortgage payments, and have at least 20% of their returns saved. Never take a deal on a house before running the numbers and conducting cash flow analysis to make sure your returns will suffice to cover your overall expenses. To make life easier, real estate investors and real estate agents especially love to use our rental property calculator tool to estimate their overall ROI, taking into account their monthly and carrying costs.
2. How to make money in real estate: Do capitalize on location
Location is a key criterion to determine the success of your real estate investment down the line. Make sure to invest in a good neighborhood with the right amenities. Safety is also key; choose neighborhoods with low or negligible crime rates. Depending on who your target tenants are, make sure to capitalize on properties that match your prospective tenants’ preferences and interests.
3. How to make money in real estate: Do invest in positive cash flow properties
Unlike the negative gearing strategy, choose to invest in positive cash flow properties to bring in rental income while simultaneously covering your overall monthly expenses. Mashvisor allows real estate investors and real estate agents to find the best positive cash flow properties in a matter of minutes. You don’t have to worry about calculating your cap rate and cash on cash return, they are readily available for you.
4. How to make money in real estate: Do invest in short term rentals
Investing in a short term real estate strategy, aka Airbnb rentals, is another good source of passive income and fast cash returns. However, an Airbnb business is far from passive, and it requires more micromanagement on the property and the guest level in order to succeed. Unlike the buy and hold real estate, short term rentals are more fast paced, and Airbnb guests are ever more demanding. As an Airbnb host, you must keep up with the Airbnb guests’ demands and exceed expectations to cultivate positive reviews and generate demand for your Airbnb business.
5. How to make money in real estate: Do your due diligence
Never neglect to research and conduct the right analysis for your future real estate investments. Analysis comes in the form of cash flow analysis, investment property analysis, and comparative market analysis. And unlike the stock market, you can almost guarantee your ROI in real estate if the right analysis was conducted beforehand.
6. How to make money in real estate: Do stay on a steep learning curve
Never stop learning! To make money in real estate, one must grasp important real estate fundamentals and acquire the right knowledge and competencies to invest for success.
7. How to make money in real estate: Do treat real estate like a business
Treat real estate like a business (instead of a hobby) and see your returns double. If you want to make serious money, have a business plan with short term and long term goals. Work on building your real estate investment networks and having a good relationship with your tenants. Be specific in what you want and strategize to build wealth in the long run. A hobby won’t give you the financial freedom in real estate.
8. How to make money in real estate: Do invest in the right stakeholders
Just like any business, you must choose the right stakeholders to manage and conduct daily operations to grow your business. Running a real estate business is not a one man show, you must depend on other people to run it and make it successful.
Related: What Real Estate Market Analysis Tools Should You Be Using?
How to Make Money in Real Estate: 8 Don’ts
1. How to make money in real estate: Don’t forget to have a business plan
Always have a long term plan and a vision for your real estate business. You cannot possibly succeed if you don’t know where you’re going.
2. How to make money in real estate: Don’t rush into a deal
Never close a deal without crunching the numbers and doubling down on computing your cash flow and ROI trajectory.
3. How to make money in real estate: Don’t buy without inspecting the property first hand
Do not depend on a property manager alone to assess the feasibility of the rental property. Take matters into your hands and have the full control over your real estate investments and business.
4. How to make money in real estate: Don’t choose prospective tenants on a whim
Run background checks, interview more than once, and have a diligent screening process in finding the right tenants for your rental property.
5. How to make money in real estate: Don’t forget to crunch the numbers
Mashvisor does all the number crunching work for you. Don’t believe us? Go check it out for yourself.
6. How to make money in real estate: Don’t ‘fix and flip’ at the very beginning
If you are a novice investor, stay away from the fix and flip strategy and opt for a safer real estate investment (i.e., buy and hold) to kick start your real estate business.
7. How to make money in real estate: Don’t neglect your cash flow analysis and trajectory
This point is worthy to mention twice! Assess your cash inflow and outflow for smarter real estate investments.
8. How to make money in real estate: Don’t put all your eggs in one basket
Diversify, diversify, diversify!
Related: 5 Things I wish I Knew Before Becoming a Real Estate Investor
Conclusion
There is no doubt that real estate investing can be a very lucrative career path, and most successful investors are reaping the full fledged benefits of the trade. However, do not underestimate the work and due diligence that goes into running a real estate business and diversifying your real estate investment portfolio for the maximum profits and highest rewards.
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