Real estate investments are actually one of the best ways to generate an income. In fact, real estate investors have many options to choose from on how to make money in real estate.
Long-Term Residential Rentals
The most traditional way of making money from real estate investing is long-term residential rentals. Buy investment properties and hold on to them; rent them out to long-term tenants in order to generate a steady rental income. People will always need places to live, and your investment property will be fulfilling this need, while you enjoy positive cash flow from rental income. Long-term residential rentals are considered the best real estate investment strategy among many real estate investors. It’s even easy for a beginner real estate investor to learn how to make money in real estate from traditional rentals.
How to make money in real estate from residential rentals
Real estate investors need to consider the location of residential rentals when thinking about how to make money in real estate. A good location will ensure that a real estate investor has no trouble finding tenants for the investment properties. Look for desirable locations in good school districts, near commercial centers, with high walkability, and good public transportation.
The best real estate investment strategy for residential rentals is to find a run-down home in a great location. If you buy investment properties like these, not only will they require less of an initial investment, but once you fix them up, you’ll benefit from appreciation as well. This means that when you sell your investment property, you’ll find it has a greater value than when you purchased it.
A successful real estate investor usually looks for investment properties that already have positive cash flow. While it’s not always easy for beginner real estate investors to find positive cash flow properties, there are certain strategies for doing so. Read this guide on how to find positive cash flow properties, and you’ll learn how to make money in real estate from this strategy.
Related: Long-Term Rentals: Why You Should Invest in Them
Short-Term Rentals
Expand your real estate investment portfolio to include short-term rentals. Airbnb rentals are growing in popularity as real estate investments. These investment properties are set up to receive tenants who consist of travelers and tourists who rent out the investment property for a short time. As a beginner real estate investor, you need to know how to make money in real estate from short-term rentals.
How to make money in real estate from short-term rentals
Just like long-term residential real estate properties, short-term rental properties depend on a good location. An extra factor is tourism: real estate investors have to find great locations that tourists want to visit. This could be a place where they will find unique shops, adventurous activities, or even just a quiet place to relax.
Another major concern is property management of the short-term real estate investments. Whether real estate investors choose to be the landlord or hire professional property management, it has to be on point in order for Airbnb guests to keep coming back. This will help get you a steady rental income for positive cash flow.
Related: Where Can You Find Airbnb Properties for Sale?
Home Renovation Flips
Fix-and-flip real estate investments have become very popular recently, and for a good reason: they’re a great way for making money without having to become a landlord. This can be the best real estate investment strategy for seeing a return on investment sooner rather than later. For beginner real estate investors, home renovation flips can be a bit difficult, but there are a few key things you should know.
How to make money in real estate from home renovation flips
The first thing is to buy investment properties that are in need of repair but are also found in great locations. Before jumping into run-down real estate investments, you have to know the costs of the repairs as well as the after-repair value. If costs are justified by the after-repair value, then this could turn out to be the best real estate investment strategy. Find a good contractor who can inspect the investment property with you and help you estimate costs and after-repair value.
Related: 5 Tricks to Save on Fix-and-Flips
Lease with an Option to Buy
Rather than having to buy investment properties right away, real estate investors have the option to lease a real estate property with an option to buy. This the best real estate investment strategy when you find that you don’t have enough money to invest with. It gives you time to save up so that when the lease ends, you can buy the investment property.
How to make money in real estate from leases
Real estate investors have to approach this investment strategy with caution: they shouldn’t enter leases that force them to buy, it should be an option. This is because leases with an option to buy work best in a real estate market that is climbing. The real estate investor leases with a pre-set price. If the market rises, he/she will be able to buy investment properties at a lower value than the market predicts. This will require some research into real estate market trends in order to see a return on investment. Real estate investors also have the option to sell their right to purchase to another interested real estate investor.
Contract Flipping
To buy investment properties is to take on a great risk. What if you can’t find a buyer or tenants? A way real estate investors avoid this risk is through the investment strategy of contract flipping. This requires finding property sellers and property buyers before buying investment properties.
How to make money in real estate from contract flipping
For this route, real estate investors have to find distressed property sellers and willing property buyers. Look for real estate investment properties that have been on the market for very long and haven’t sold. Vacant homes or homes that are behind on mortgage are investment properties that are likely to have distressed property sellers. Finding these real estate properties and the property buyers will take some research and even a real estate investment network, but it can have a great payoff in the end with little risk.
Short Sales
While foreclosed investment properties can be great real estate investments, homes that haven’t been foreclosed just yet are a good way of making money in real estate as well. Short sales require finding an owner who is behind on his/her mortgage, but the bank hasn’t yet foreclosed on the real estate property. With home renovations, an investment in repairs is the major way you see an increased return on investment. Here, however, you’ll be buying the investment property for less than what is owed in the mortgage and be able to see a higher return on investment without major renovations.
How to make money in real estate from short sales
First, be sure to inspect the home, especially if you are a beginner real estate investor. An experienced, successful real estate investor might be able to purchase one blindly, but it’s a risk. Also, investment property analysis will help you determine if there is a fatal reason why the investment property didn’t have a positive cash flow to meet mortgage payments. Then, begin to negotiate with the bank for the investment property. A bank will generally want to let go of the investment property quickly, but that doesn’t mean you can offer up a ridiculously low price. Once all agree on the transaction, you can purchase the investment property and start making money whether you choose to sell or hold for rental income.
When real estate investors take the time to learn how to make money in real estate, they can soon become successful in the field. Because there are so many approaches to making money, you can choose a few to expand your real estate investment portfolio while enjoying positive cash flow. Remember, it does take time to make money, even though some routes are quicker than others. Be patient, and you’ll find that real estate investments are definitely worth the time and money.
If you’re having trouble finding any of the investment properties mentioned in this guide, turn to the listings on Mashvisor. Mashvisor makes it easier to find rental properties from all over the nation and helps real estate investors at any level determine which investment properties make the best real estate investments.