The real estate market offers some of the best opportunities for making money.
Whether you’re an expert real estate investor, a real estate enthusiast, or just someone who’s trying to sell a house for a profit, there are several ways to make money in the world of real estate.
For beginner real estate investors who lack the knowledge and experience in the housing market, there are some options that can allow you to easily make money with a minimal amount of risk.
This blog aims to explore the most beginner-friendly strategies used to make money in the real estate business.
How to Make Money in Real Estate?
The world of real estate is all about two things: Finding a place to live and making money.
While finding a place to live might be a more relevant topic for most people, this blog is concerned with the process of making money in real estate, which is a topic that every real estate investor should find interesting, as it is the main drive behind investing in real estate.
So, when talking about making money in real estate, there are several options that come to mind: from the type of real estate property, through the investment strategy, to the method of investment. A real estate investor is not limited to any one type of real estate investing, but most investors will typically limit their investments to a single or a few types of real estate properties or strategies based on their personal preferences and specialize in them.
There are, however, a few types of real estate investing that are more popular and more accessible to all real estate investors and are generally the go-to choice for most beginner investors due to being more manageable and less punishing in the case of failure.
Related: Can Just Anyone Be Making Money in Real Estate?
Flipping Properties
Flipping properties is one of the most common ways for making money in the world of real estate. The simplest way to describe real estate property flipping is that it’s the process of purchasing a real estate property for the purpose of reselling it for a profit.
Whether the real estate investor is purchasing a property and holding it for a period of time until it appreciates in value, or is renovating the property to increase its value, the flipping strategy is always based around the idea of selling the property at a higher price than what you’ve bought it for in order to achieve a profit.
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Fix-and-Flip
Purchasing a real estate property that is in a poor condition with the purpose of renovating it and selling it back at a higher price is called a fix-and-flip. Fix-and-flip is an effective way for making money in real estate due to the generally simple nature of this strategy. It is usually easy to identify a property that is in a poor condition and that requires renovation, and this type of property can often be purchased at a fairly low price compared to the average market value in the area.
One of the most crucial aspects of a fix-and-flip real estate property, in order for you to be making money through your investment, is to always make sure that the costs of renovating or fixing the property, combined with the cost of purchasing the property, are not equal to or higher than the price or value of the property after renovation, as this will mean that you’re not making money by selling it, and might even cause you to lose money in the process.
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Foreclosures and HUD Homes
When a homeowner can no longer afford the mortgage payments on his/her property, he/she usually loses ownership over the property, and the property’s ownership is transferred to the lender of the loan, turning it into a foreclosed real estate property.
Typically, the HUD (Department of Housing and Urban Development) would purchase the foreclosed home and try to sell it back in the housing market through public auctions. Foreclosed home, in most cases, are left in a poor condition due to being vacant for long periods of time, and due to their previous owners’ not being able to afford to maintain the property in a good condition, as well as a number of other reasons. This makes foreclosed homes a perfect target for fix-and-flip real estate investments, as they are usually much cheaper than other properties in the housing market, while offering great opportunities for renovation when planned right, which can be used as a great way for making money in real estate.
Related: How Can You Make Money from Home in Real Estate Investing?
Rental Properties
The other most common type of real estate investing for making money is through rental properties. This includes any type of renting out a property or a part of a property for the purpose of making money through rental income.
There are numerous ways for making money through renting out, but they can generally be divided into two categories:
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Short-Term Rentals
This method involves renting out a property or a part of a property to tenants using a short-term lease agreement. This type of rental properties is becoming increasingly more popular with the rise of Airbnb, an online platform designed solely for the purpose of facilitating and listing short-term rental properties worldwide.
While short-term rental properties are typically more difficult to manage, in many places around the world and in the US, they can be a much better choice for making money and can result in a much higher rental income than long-term or traditional rental properties.
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Long-Term Rentals
The most common, and the most traditional form of real estate investing – long-term rental properties – are the most risk-free type of real estate investment. Long-term or traditional rental properties are a great option for any real estate investor, experienced or new, due to their easy-to-manage nature and their less punishing nature in case of error.
Finding a long-term tenant and signing a lease agreement to rent out the property for a year or a few years will guarantee that you will be making money through rental income for the entire duration of the lease (if the tenants are good), allowing you to enjoy the passive rental income from your real estate investment.
Related: The 8 Best Ways to Make Money in Real Estate Investing
Bottom Line
Making money through real estate investing can be achieved through numerous ways. Some of the strategies used in the real estate world can be as simple as the ones listed above, while others can be more complicated and risky or can simply require more experience and knowledge in the world of real estate in order to pull off.
No matter what your strategy is for making money in real estate, Mashvisor can be a great tool for you to utilize, which will give you an advantage over other real estate investors, allowing you to compete more effectively in the housing and rental market.