Real estate is a tangible and lucrative avenue for wealth creation in volatile stock markets and uncertain investment landscapes. Beyond the stock market, individuals seeking alternative investment opportunities can turn to real estate, where rental income, property appreciation, and diverse strategies offer the potential for long-term financial growth and stability.
Real estate can make you money in several ways, including appreciation and rental income. You can also make money by wholesaling properties.
Whether you’re looking for a new source of cash flow or want to build wealth through investment property, there are plenty of opportunities. Let’s dive into some of the most popular ways to make money in real estate.
Buy and Hold
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The buy-and-hold real estate strategy is a favorite among investors looking to generate consistent cash flow over a long period. This strategy involves purchasing and renting a property to tenants to make income. It is a great way to invest in residential or commercial properties, and it can also be one of the fastest ways to make money from real estate.
However, this strategy requires significant work and time since you must manage the properties. You may need to perform inspections, meet with tenants, and handle various other responsibilities. However, you can minimize the work and risk by working with a real estate management company to handle all aspects of your rental properties.
Another benefit of buying and holding real estate is that the rent you collect will help you pay down the principal on your loan, which can reduce your overall interest charges over time. This is especially true if you purchase a property in a growing neighborhood with high demand for housing.
Whether you want to flip real estate properties or just earn passive income from rental property investments, finding the right path is essential. You don’t have to have credit or significant capital to get into the game, but it’s essential to know which areas of real estate are the best fit for you.
For instance, if you’re interested in house flipping, you must find properties selling for less than expected after-repair value. This calculation is based on several factors, including location and property condition.
Another way to make money from real estate is by wholesaling. This involves finding undervalued properties and selling them to investors for a profit. This is easier than flipping because you don’t need to perform any repairs on the property. However, it can still be a high-risk investment if you don’t do your homework. It’s essential to work with a mentor who understands the business.
House hacking involves buying a home and then renting out part of it. This can help make the property more affordable while you live there or even cover your entire mortgage. This strategy is also an excellent way to gain experience in landlording, including advertising and securing tenants, managing tenant issues and repairs, and understanding rental tax deductions.
Unlike other real estate investments, which require large down payments, house hacking is an excellent way to get started in real estate investing with a relatively low amount of capital. This real estate investment strategy can also allow you to qualify for financing options like FHA and conventional loans, which have lower down payment requirements than investor-only mortgages.
However, knowing what to look for in a suitable house hack property is essential before considering this real estate investing strategy. The best properties for this strategy are usually fixer-uppers or multifamily homes. They should also be in areas with high demand for housing due to proximity to public transportation, restaurants, and social gatherings.
Renting Out Raw Land
Raw land investments are an excellent option for new and experienced investors. This real estate investment involves buying a piece of property, then flipping it for more money. To make this work, you must find a buyer and seller, then transfer the contract to them.
Another way to make money from raw land is to rent it out. This strategy works for residential, commercial, and short-term vacation rentals. Renting out properties can bring in a monthly cash flow that covers your mortgage payment, homeowners insurance, real estate taxes and home maintenance costs.
You can also earn a passive income from raw land by paving it and turning it into a parking lot. This is incredibly lucrative if the land is near a popular area, arena, or fairground with limited parking spaces. You can also make money by leasing your land to ranchers for livestock or letting people set up shooting ranges on it.
Getting rental income from real estate involves finding tenants and managing the property. These responsibilities can be challenging, but a property management software platform like Avail can streamline the process and keep everything organized. It offers a variety of features that can save you time and help you maintain your properties, including advertising on a dozen sites, screening tenants, accessing state-specific lease agreements, and collecting rent payments, among others.
Real Estate Investment Trusts (REITs)
REITs are investment vehicles that allow individuals to invest in real estate. REITs are tax-advantaged corporations that derive a large percentage of their revenue from rents or mortgage interest on properties and are required by law to pay 90 percent of their taxable income as dividends to investors.
Private REITs do not trade publicly but must file quarterly and annual financial disclosures with the SEC. This information is available to the public, and you can search for REITs on the SEC’s EDGAR database.
Non-traded REITs are not registered with the SEC, but they must file with the SEC regularly and report quarterly and annual financial disclosures.
In today’s challenging economic climate, real estate offers opportunities for making money and securing financial stability. While market fluctuations and uncertainties may present unique challenges, strategic approaches such as rental income, property appreciation, and creative investment strategies can still yield lucrative returns. By staying informed, adapting to market conditions, and leveraging the right tools and resources, individuals can navigate this economy and tap into the potential of real estate to build wealth and achieve their financial goals.