Despite the common misconception, owning an investment property is not the only way of making money in real estate!
The real estate investing industry is vast, with numerous investment strategies for anyone out there interested in becoming a real estate investor. One of the many benefits of real estate is that it’s a physical asset which you can own and rent out to build wealth. However, not everyone is financially able to buy a rental property. Not to mention, property ownership is definitely not a walk in the part. This leads us to our main question: is it possible to start making money in real estate without property ownership?
Short answer – absolutely! A real estate investor can enjoy the benefits of real estate investing without going through the hassle of owning and managing a rental property. Thus, if you can’t afford a down payment to buy an investment property, don’t let this stop you from breaking into the real estate market in 2018. Keep reading to learn about the best 5 investment strategies for making money in real estate that don’t involve property ownership.
Real Estate Investment Property Trusts
When we think of passive real estate investing, the first thing that comes to mind is real estate investment trusts. REITs were introduced in the 1960’s with the purpose of giving investors a way of making money in real estate without having to own an investment property. These are companies that own and finance a large pool of cash-generating investment properties (both residential and commercial) like shopping malls, hospitals, apartments and office buildings. Depending on their structure, they can be publicly traded or held privately, and are usually in the form of equity.
REITs are a great option for passive investors. A real estate investor simply buys shares of the REIT, the trust continues to earn value and, in return, pays dividends to the investors. This way of making money in real estate is great because it only requires capital from investors – property ownership belongs to REITs, not the investors.
This is the best for making money in real estate for someone thinking of entering the real estate investing industry but doesn’t have a big capital nor the time to deal with tenants, property management, etc. Furthermore, REITs typically own multiple investment properties. Thus, investing in REITs not only means making money in real estate with minimal responsibilities for the real estate investor, but also a diverse real estate investment portfolio!
Making Money in Real Estate Wholesaling
Wholesalers are basically middlemen between sellers and buyers that help close real estate transactions. Here’s how you can start making money through wholesale real estate: First, find a distressed seller and negotiate to sell the investment property for a significantly low price. Second, after coming to an agreement, assign the investment property to a contract. Now your job is to find an end-buyer before the contract expires. After finding an end-buyer, the final step is to sell him/her the contract. As a real estate wholesaler, you’ll earn part of the profit from closing the transaction.
Many property investors consider this way of making money in real estate because, as you can see, it doesn’t involve property ownership. Real estate wholesalers don’t even have to spend a lot of money to acquire a contract for the investment property. Therefore, wholesalers are making money in real estate without being concerned about repairing investment properties before selling it or having to worry about mortgage payments.
However, wholesaling does have some requirements to succeed. These include negotiation skills, experience in the real estate market, and a network of potential end-buyers. Therefore, even though this is one of the best ways for making money in real estate without property ownership, the success of the investment transaction depends on you.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Real Estate Partnerships
Why do something on your own when you can have a partner? Real estate partnerships are a great way to start real estate investing when you don’t have enough capital for a down payment to buy a rental property. They’re also great to make money in real estate without property ownership! Maybe you do have enough capital to start real estate investing on your own, but you also have a full-time job that makes property ownership and the responsibilities that come with it a hassle. Why not partner up with another real estate investor?
Real estate partnerships are structured differently depending on investment and financial goals of the parties. If you’re interested in making money in real estate with a partner, you can come to an agreement where you can finance the purchase of the rental property while your partner is responsible for managing it. You will receive a share of the profits that the rental property generates while having minimal responsibilities!
Related: Where and How Can You Find a Business Partner for Your Real Estate Investing Business?
Real Estate Property Management
A lot of property investors who do own a rental property struggle when it comes to management. Maybe they have a 9-5 job, maybe their investment properties are out-of-state, or any other reason. That’s why professional property managers exist and why property investors all over the world make use of their services. However, if you don’t want to own a rental property but making money in real estate is still your goal, why not consider becoming a property manager yourself?
Professional property management charges a fee in exchange for managing investment properties on behalf of property investors. The range of management fees is typically 8-10% of each month’s rental income. Thus, although being a property manager can be stressful and demanding at times, you can definitely benefit from making money in real estate without property ownership. The catch here is to find investment properties that generate high rental income!
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Keep in mind that property managers are required to be licensed by the state, but this varies from one state to another so this might not be the case for you. Thus, make sure you check what is required of you to become a property manager before considering making money in real estate this way.
Become a Real Estate Developer
Real estate development is the engine that drives the growth in the real estate industry. A developer is someone who finds and buys land with the aim of constructing new investment properties (whether traditional or commercial) and selling them to property investors afterward.
When talking about making money in real estate, this is THE strategy. There’s no set salary for developers. However, they make much more than other real estate careers. How much they make mainly depends on the type of the project and its scale – is it a shopping mall or a residential unit? In some cases, the profit developers make exceeds $1,000,000!
However, keep in mind that developers don’t see this profit until after selling the investment. In addition, being a real estate developer is not an easy career; it comes with major risks where you can either make huge profits or face crushing losses. Thus, if you’re interested in making money in real estate by becoming a real estate developer, make sure you first understand what it takes and do your research.
Related: Should I Become a Real Estate Developer?
The Bottom Line
There is no one-size-fits-all for making money in real estate. The real estate market is vast and offers a wide range of strategies that fit the needs of a wide range of different property investors. If you’re looking for a way to make money without property ownership, at least one of the above options will work for you. Which strategy do you think is best? Let us know in the comments!
To keep learning about the different aspects of real estate investing, continue reading our blog!