How to Make Money in Real Estate with 11 Proven Tips

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Diversifying your investment portfolio is always a good idea. If you keep up with the news, you know that real estate is getting hotter. It used to be that many experts believed real estate was a good way to get rich slowly. 

That’s no longer true. The truth is that real estate investment today can make you “rich quick”. Real estate can be a great addition to any investment portfolio. But it takes time and knowledge to be successful.

Real estate is a big asset class. Yet, it can be difficult to invest or earn passive income from real estate. This is because of its size and the complexity of ownership and transactions. This article will outline 11 proven ways you can make money in real estate.

1. Commercial real estate

Commercial properties provide a huge potential source of income. Also, it offers a great ROI and cash flow. But, it needs a great level of experience because you need enough capital to start. 

Commercial real estate means purchasing income-producing properties such as businesses or multi-unit buildings. In essence, you are making money by borrowing money to purchase property that is already earning money. Then collecting the cash flow from the tenants who have rented part of that property.

The commercial real estate market is a contested field, whether interests are at the local, state, or national level. The best way to make money in commercial real estate is by developing an effective strategy for success. 

You can achieve this with the help of an experienced professional. Here are some of the ways that you can make money in commercial real estate:     

  • Building rented residential units     
  • Developing and building shopping centers     
  • Buying and developing residential land     
  • Partnering with other investors on a project

The concept is simple – buy a commercial property, make some changes with the help of a contractor and sell it again. The actual income comes from renting the property out to different companies.

2. Vacation rentals

If you are a passive investor or work from home, make money investing in vacation rentals. This is an investment for real estate that anyone can do. Vacation rentals are becoming the most popular type of rental property. 

This is because they can earn good returns for investors. Besides, they offer low maintenance and long-term positive cash flow potential. 

Vacation rentals are where the owner of the property rents his/her house out for a short term to travelers. These houses can be leased for one week, one month, six months, or per annum.

Many escape to warmer shores and sunny climates or find enjoyment in the mountains or along distant shores where they can spend hours on end exploring a new area. 

With vacation rentals, you can ensure that your guests enjoy exactly what they hoped for when choosing a rental property. Also, you enjoy the income from your rental property.

SEE: How to Make Money With Rental Apartments

3. Long-term residential rentals

Long-term rentals can be a lucrative strategy for generating good cash flow with real estate, particularly with multi-family properties. 

This type of rental property investment can be a good option for individuals with other sources of income, either from working a full-time job or from another source of passive income such as the stock market. 

Part of the appeal of real estate investing is a stable income. You can receive consistent monthly payments from tenants who are obligated to pay rent until their lease ends.

If you have a good plan to screen, and select tenants, your chances of finding a reliable tenant increase. 

Long-term residential rental properties can provide excellent returns on investment if managed correctly. Once you establish your property as a desirable living environment in your local area, you can rely on consistent income for many years without much effort.

4. Lease options

A lease option is a non-binding agreement to buy a house or property. Where the tenant has the right to become the owner of the property for a certain amount of time after making periodic payments. 

In some cases, the tenant enters into a lease option contract with the actual owner of the property. Lease options have been used since the beginning of time as well as in all cultures around the world.

The lease can be written for any time frame desired but should be at the end of a quarter or less than three months. But, in most situations, leasing options are arranged through a third party who owns and controls the property and represents both buyer and seller.

A lease option is a form of alternative financing. It can be useful to homeowners or investors who want to sell or buy properties. Investors can buy properties and resell them at a later date, either at a profit or for personal use.

5. Home-renovation flips

Home-renovation flips are one of the best ways to get your foot in the door in real estate. The demand for houses has been increasing for years, while the supply has been decreasing. For those who want to turn properties into profits, flipping is an excellent way to do so.

A “flip” is a home renovation project that you buy and sell at a higher price.  A house that is cheap to buy can be renovated into a masterpiece that has a great appreciation. 

Contrary to popular opinion, flipping houses is not a zero-sum game. It’s not about being sleazy or unscrupulous. And it’s not a shortcut to riches. It’s about doing the best deal you can with the resources you have, both financially and human capital-wise, in the real estate market that happens to be booming at that moment. 

There are lots of foreclosures out there right now, which can result in fantastic deals for home flippers. There are entire neighborhoods where properties are practically giving themselves away because they need work and have let down their owners. 

Yet, flips are investments, and like stocks, there’s risk involved. Be sure to know how to handle the risks if you feel this is an option you might want to consider. 

SEE: How to Make Money Flipping Houses

6. Money lending

With interest rates at historical lows and many lenders disappearing from the market, more investors are finding opportunities in small-scale money lending. 

On the hunt to earn extra income, these investors buy financial products with attractive yields. Also, they use those funds to make short-term loans based on the borrower’s promise to repay. 

Money lending can be a solid strategy for building wealth in real estate. Make sure to do your homework to ensure that each loan has a high likelihood of being repaid.

7. Real estate investment trust (REIT)

If you’ve been looking at the real estate market intending to buy some investment property, you may have already come across REITs. REITs (Real estate investment trusts) are self-managed and professionally-traded real estate investments.

REIT is a class of equity that owns, operates, and leases real estate properties. The trust structure allows companies to trade on the stock exchange with the liquidity of corporate shares.

REITs are also dividends-paying investments. If the company makes a profit, it distributes a significant percentage of its taxable earnings to shareholders in the form of dividends. Real estate has demonstrated a solid return as an asset class over many decades.

The equity investment market is a popular way to invest in real estate. The biggest advantage of investing in this way is that your potential returns are higher than a single property investment. 

8. Investing in Mortgage Notes

Investment in mortgage notes is a little more complex than investing in mortgages, but it can be very profitable. The idea is that you provide the money to buy the mortgage. Then you collect principal and interest payments every month. 

Investing in real estate notes can be a great high-yield alternative to investing in traditional stocks and bonds that are traded on the public markets. Notes provide risk diversification to your fixed-income portfolio. They offer exposure to the real estate market, which is dependent on local economic conditions. 

It provides the beneficial characteristics of a small personal loan, with reasonable interest rates, less uncertainty in payment amounts, and a clearly defined due date which makes it a very secure investment.

To sum it up, investing in mortgage notes is investing in the payments that a loan generates over an extended period. Typically, these loans can last anywhere from 10 yrs to 30 years (and sometimes even longer). 

9. Real estate limited partnerships

A real estate limited partnership is a way to invest in real estate by joining with other investors and pooling your money. In a limited partnership, you receive a stake in the business that is reflected by your ownership percentage. 

This investment strategy involves investing in a real estate partnership. Limited partnerships invest in different things such as real estate development, construction, or projects.

Real estate limited partnerships are set up to allow general partners to invest in real estate deals without taking on full liability. These are popular because investors and businesses can get similar returns as regular real estate, but with much less risk.

10. Invest in turnkey properties

Like stocks, when you buy turnkey property you are purchasing real estate that is already income-producing. Investing in turnkey properties can be an excellent way to make money with real estate. Turnkey properties are homes that are partially or fully furnished and completely ready for living. 

Turnkey properties are available as residential or commercial units. Residential Turnkey Properties are equipped with furniture and appliances. furthermore, they make an easier transition to homeownership. 

Turnkey investing has many benefits, the most important of which is that you get to skip the hassle of looking for tenants and physically maintaining your property yourself. 

When investing in commercial turnkey properties you can buy real estate that is already occupied by tenants. They can then be transferred into a lease agreement or you can buy the building alone without a tenant.

11. Real estate crowdfunding 

Crowdfunding has taken off lately. The first main product to kick-off mainstream crowdfunding was real estate. In real estate crowdfunding, you take small percentage ownership of commercial property in exchange for funding your share of the down payment of the real estate. 

While the real estate market is unpredictable, it is possible to make money in real estate by investing in crowdfunding platforms. These platforms provide returns from investments made into projects that seek returns on rental income, capital appreciation, and equity.

These crowd’s investments funds are provided to real estate developers, and build residential and commercial projects through the use of technology.

Quick tips to successfully make money with real estate

1. Study the market

Studying the market will help you recognize its trends. Study the various kinds of properties that are available in the market. Also, check on the price range of these properties so that you can invest in those areas that have the potential for returns. This information can then be used to make money with real estate.

2. Set a budget and timeline

Everyone wants to make money in property investment but making money is not the only thing to consider. You should also set a budget and timeline for your investments. To begin with, you must try to find out how much you can afford and when you expect to give up that money as capital.

3. Build a website

Building a website is useful in terms of putting your products or services online to reach out to more potential customers. Designing a website is now easy with the help of various website builders. 

The benefit of having a website is that it is the easiest way to get your products or services out to the masses without having to spend too much on advertising and marketing. 

At the same time, once you have a site, for the most part, maintenance is simple while money piles up over time.

4. Stay educated

Staying on top of your real estate education will enhance your decision-making and moneymaking ability. Learn more about the real estate market to gain a better understanding of how your investments perform and keep an eye on relevant legislation that could affect the profitability of your business.

Final thoughts

Real estate is the biggest business in the world. Land on this planet is limited. This means that more and more of it gets built on each year. That’s why real estate is good for investment. 

You can earn a nice return by doing nothing more than putting down a deposit now and then and waiting for the playtime to roll in.  In reality, it is relatively easy to come up with 11 different ways to make money in real estate but each requires a lot of effort and risk. But you can make a handsome amount if you have the time and talent.

Here is a post on how to make money with investment properties you may want to check out. Thanks for reading.