You can make money from real estate even if you are just starting out. After decades of saving and investing, I think real estate is one of the best ways to make money. If you want to make money in real estate, you need to keep hawks eyes on the overall pricing element. Selling at higher rates. Rental income. Here are the 19 proven effective ways to make money from real estate.
Real estate has produced more wealth than any other industry in the history of time. However, people still remain skeptical about entering into the fray. Most think that they need to start with some sort of capital. That’s clearly not true. The one magic power you do need is to be able to find the money. And we’re often not talking much to open up escrow. If you know what you’re doing, then you can make money in real estate even if you’re just starting out.
1. Commercial real estate
One of the great opportunities in real estate for making a considerable amount of money is to invest in commercial real estate. Commercial real estate developers focus not only on flipping properties, but also in developing them, adding value to them to increase their net incomes through rehab or renovation and upgrades, but also through consulting on projects that might take more seasoned real estate investors to see to fruition.
2. Work Corporate Housing Rentals
“Last year the Corporate Housing Providers Association (CHPA) reported rental revenues of $3.2 billion in the United States alone. That is $3.2 billion in rental dollars that corporations are spending to lease furnished residential properties on a month to month basis. This is an enormous and largely untapped potential rental income stream. Corporate housing investing can substantially increase the returns on your residential investments while also reducing your pain-per-dollar compared to vacation rentals. Although corporate housing has traditionally been transacted between corporations and large-scale corporate housing providers, individual real estate investors can leverage the rising demand for corporate housing to their own benefit. With corporate housing tenants paying an average of $4,500 per month for furnished one-bedroom apartments and the need for these housing units still on the rise after four years of trending upward, the possibilities are staggering.
Corporate housing has emerged as more than just an essential business service for relocated or traveling business executives. Today, corporate housing is a full-fledged lodging solution for everyday individuals who need short-term housing that has the space and convenience of a home on the road.”
3. Build Flats and Rent Them Out
“Yes, many states allow homeowners to build a separate living unit on their property and rent it out.
California just passed a new ADU (Accessory Dwelling Unit or Granny Flat) law that encourages owners of single-family homes to build additional rental units on their properties to help ease the housing shortage.
As an example In Los Angeles, you could build an ADU unit for $125,000 and rent it out for $3,000 a month! The land is free, you already own it! The rent of the rental unit could pay the homeowners entire mortgage payment.”
4. Invest in Land
Although the learning curve can be a bit steeper compared to other ways to make money in real estate, buying land is one of the best investments you can make in real estate. After all, they’re not making any more of it.
5. Purchase Lease to Own Properties
“This is a way to open up your property to an additional pool of renters that would love to own one day but are not in the market for a mortgage just yet. It is a way for them to achieve that goal without having to have a large down payment and to qualify for a traditional mortgage now.
These renters can typically pay more than the average renter and can offer a small down payment. The first step is to design a Lease to Own structure that is fair to both you and the tenant. If they don’t ending up buying the property, you still end up with better income and if they do you have an exit strategy for the property and you can move on to more investments.”
6. Vocational Rentals
Vacation rentals present a lucrative path to profits in the real estate marketplace. Not only can you make some side hustle income from vacation rentals, but you could potentially make a significant amount of money and build up a substantial passive income stream if you’re in a highly-trafficked tourist locale. Places like Los Angeles, Miami and other tourist hot-beds are well known for having high demand for these short-term rentals.
7. Short sales
Short sales occur when the current owner of their home is behind on their mortgage, but the property hasn’t yet entered into foreclosure. In order for this to happen, all parties have to agree to the transaction since the property is being sold off for less than is owed on the existing mortgages. This is a great opportunity to make a quick profit without investing into lengthy renovations.
However, succeeding with short sales or any other default-type auctions is often tricky. You usually need to pay for the homes outright in cash and sometimes that has to happen sight-unseen. Short sales are better than auctions because you get a chance to check out the home and enter into a negotiation process. Unless you’re a seasoned investor, jumping in without an inspection and complete review could be risky.
8. Invest in Short Term Rentals
Love them or hate them, sharing economy startups like Airbnb are here to stay. As a result, tech savvy real estate investors have been clamoring for opportunities to invest in short term rentals. Andrew McConnell, CEO of short term property management resource Rented.com explains the allure:
“The rise of Airbnb and VRBO in recent years has created a tremendous real estate investment opportunity for those who have been paying attention. As travelers increasingly prefer “alternative accommodation” options to hotels, the rental demand for such properties increases. This increased demand leads both to greater occupancy and to higher nightly rates. With Rented.com’s recent Short-Term Rental Income Report we have seen a number of markets where on average you can expect a double digit cap rate, with individual opportunities far exceeding even that.”
In order to find a great short term rental property to invest in, focus your search in areas with high demand for short term rentals. This means cities like New York and San Francisco, college towns, or areas popular with vacationers.
9. Represent Home Sellers
With all the tech tools vying for an agent’s marketing dollars these days, many realtors forget the core skill any good salesperson needs: how to build and maintain relationships.
Though she uses cutting edge real estate marketing software and makes extensive use of Zillow Premier Agent, Stacy attributes much of her staggering success in real estate to one of the oldest tricks in the book: cold calling expired and FSBO leads.
10. Selling at a Higher Rate
Almost by the same logic that buying low helps in the real estate market, you can take advantage of selling higher.
You buy the price is at a discount and when the price appreciates a lot higher, you decide to sell.
This makes sure that you can earn the maximum possible profit from the investment.
The same principle comes to play when you consider a real estate investment.
You must always target selling at a higher rate.
Not only should your selling price be higher than the buying price but this price should also help you recover the associated expenses.
For example, buying a real estate involves a lot of associated expenses like registration costs, transactions charges and legal expenses.
So when you are selling the property, you have to make sure that you get a price which covers all these expenses and still manages to book a decent profit for you.
This is the cardinal principle of a great investment strategy and one of the most primary pre-conditions that you must keep in mind in understanding how to make money in real estate.
Selling higher confirms to another primary aspect of real estate market investment, it reflects the premium that your investment commands.
It is a key indicator of the scalability extent of the property you have invested in.
If you get a significantly higher selling price, the profit prospect also rises a lot higher.
It also confirms your mettle in identifying profitable opportunities.
11. Renting in Parts
Now renting real estate also has many dynamics to make it a more profitable deal.
One of the easiest options to make money in real estate is by renting out your property in parts.
For example, let’s say you have a duplex; the rent that you can get by leasing it out to a single family will always be less than the amount you can recover by dividing the house into two separate floors and renting them individually.
Another interesting aspect of this kind of real estate rental is that you are able to realize better value for your property.
For example, if you invested $100,000 in the property and have a mortgage payment of $500, a duplex apartment can yield you a rent of $700-800 on an average.
But the moment you convert them to individual floors, you get the flexibility to charge lesser and charge double.
So instead of $700-800 for the entire house, you can now charge anywhere between $500-600 per floor.
So on an annualized basis, you get to earn a cool $3000 extra, without any additional investment.
Therefore, renting in parts increases the overall returns in the real estate market.
Of course, the location yet again plays a crucial role in determining how much you can optimize the return prospects.
Supposing you have a property close to a college area or a workplace with lots of youngsters looking out for residential options.
Here, of course, you will able to make more money from the same real estate property.
Now compare this with the potential prospects of a residential property in a predominantly business area.
It will undoubtedly have much lesser demand, and the relative rate that you can get from that rental will also be significantly lesser.
12. Invest in Wholesaling Houses
Wholesaling houses is one of the only ways to invest in real estate without a ton of capital. Here’s how it works. Real estate or investing professionals find homes that are undervalued, then put them under contract. They add contingencies to the contract that stipulate they will assign the contract to another buyer within a certain (usually very short) amount of time. They then work to find a buyer who is willing to pay slightly more than the price they are under contract for and assign the contract to them, keeping the difference as a profit at closing.
While wholesaling can be a great way to raise capital for other real estate investments, it should be noted that in certain states.
13. Apartment Rentals
If you live in a city with a low vacancy rate and high demand, you can quickly and easily make money renting apartments.
While representing tenants can be lucrative, the real money is made representing management companies and small landlords. . Considering the average one bedroom in Manhattan is over $3250, you can do very well with a small number of clients. Best of all, the deal cycle is measured in days instead of months.
14. Lease Commercial Real Estate
With the rise of so many startups, the demand for office and commercial space is only going up.
Leasing commercial real estate can be far more lucrative than leasing apartments. The rationale here is simple. Since commercial leases are often 5 years or longer, commissions in commercial real estate are often much, much higher than in residential real estate. You can even negotiate to be paid a portion of a business’s profits as your commission.
In order to succeed in commercial real estate though, you need to be tough. Competition is fierce, so you should be able to actively pursue deals and not be afraid to knock on doors to get clients.
15. Contract flipping
One way that you can make money from real estate without having to put up very much capital or credit is to flip contracts. All you have to do is find a distressed seller and a motivated buyer and bring them all together. While locating a distressed seller might seem difficult, Clothier has systematized the entire process for doing this. The trick with contract flipping is to identify the distressed seller and locate a ready-to-go buyer.
By bringing these parties together, you’ve cut out the need to go hunting for a buyer after you’ve entered a contract. That situation presents more risk. Instead, by locating the sellers and the buyers beforehand, you can easily enter into a contract with the confidence that you won’t get stuck having to close escrow on the property.
To do this, you have to be able to identify either vacant homes or homes that are behind on their mortgages. That’s the tricky part. You’re effectively trying to find distressed sellers. But homes that are already vacant are primed for an opportunity like this.
16.Become A Commercial Real Estate Agent
Commercial real estate agents earn a lucrative income. They are paid good monthly salary whereas residential property agents get paid on the commission basis. Commercial real agents earn much more than their residential property counterparts do. This is because the commercial agents have extensive knowledge of valuation of commercial properties.
17. Work As A Broker
As a broker, you will be in charge of the real estate agents in your office. You will also be running the office. Your responsibility will be to ensure that everyone works legally and you will take care of any legal disputes. You can start by having a couple of agents in your office and then grow up from there to have more agents working under you.
As a broker, you will earn a percentage of the agents’ commissions as well as desk fees or advertisement money from the agents. However, many states will allow you to become a broker only after a certain amount of time of getting your real estate agent’s license. So, these are the jobs you can do as a real estate agent and earn money regularly.
18. Lease options
Lease options are a great way to get involved in real estate without having to put up a significant amount of capital or even have great credit at the outset. You’re leasing with an option to buy. This tends to work well when the real estate market is climbing because you’re creating a pre-set price that you can later purchase the property at.
If, for example, the property market climbs substantially, you can buy that property at a discount. You could also potentially turn around and sell your rights for that purchase to someone else. The clear bet here is on the bull market in real estate. As long as this is an option you can exercise and not something set in stone that says you have to purchase at the end of the lease regardless, then you can just about guarantee you’ll turn a profit.
19. Invest in Non-Performing Notes
Non-performing notes are mortgages that borrowers are behind on. Instead of foreclosing on the property and selling the home, lenders instead sometimes sell the non-performing mortgages to investors at a deep discount.
There can be a great deal of financial risk investing in non performing notes, so proceed cautiously. Lengthy legal battles to foreclose and get a clear title can cost investors tens of thousands in legal fees.