One of the most efficient ways to make money and build a fortune is to invest in real estate. Let’s show you 9 different ways to make money in real estate. Yet this is often a capital-intensive venture.
9 Different Ways to Make Money in Real Estate
Of course, the old tried-and-true method of buying up rental properties or developing vacant lots still works. But these nine ideas of making money in real estate will show a whole new world to this side of investing. That will make real estate less intimidating and invest in it more imaginable.
Buying a Rental Property
Make Money In Real Estate By Buying A House
One of the most common ways to make money from real estate is to own a rental property. Luckily for investors, many developments are constructed each year with rental investors in mind. These units range from simple apartments and condominiums to townhomes and even full-fledged homes within new communities. Rental properties come in various styles and at many different price points. But they all share the common goal of securing long-term, stable income streams for their owners via leasing out their spaces to tenants.
Is Owning A Rental Property A Good Choice?
As you can probably already imagine, there are many more moving parts to owning a rental property than first meets the eye. From securing the property in the first place to meeting all of the legal requirements necessary to be a landlord, rental properties are not for the faint of heart. And that’s before we even dive into the real fun of finding tenants, keeping them, and dealing with any issues that might arise.
Real-Estate Crowdfunding
Perhaps owning your rental property is not for you. Whether you don’t want to deal with tenants or don’t have the capital to buy an object in whole, you can still make money from real estate by participating in real-estate crowdfunding campaigns. Real-estate crowdfunding brings the market’s investment and funding side into smaller cap investors’ hands. Nowadays, there are plenty of platforms, like Crowdstreet, for example.
Typically developers will find a home, property, or some other development and then gather crowdfunding investors to help them get together the capital to build or renovate said real estate. In exchange for this, investors get a share of ownership in the project. Investors tend to like these because they typically come with cash-out dates when the project will either be refinanced or liquidated to buyers, giving a much quicker return on capital.
Rent Out Your Primary Residence
Do you already own your home? Perhaps you can compartmentalize it and rent out portions of it to make it more income efficient for you. Or, better yet, if you live in a high-demand neighborhood, you could rent out your primary residence and use that income to fund the purchase of another property that you live in or the rental of a cheap apartment. Either way, you are utilizing a current asset to generate income for yourself without going into debt or borrowing a bunch of money you don’t have.
Whether it involves taking on roommates or using your residence as the foundation for your real-estate empire, it doesn’t matter. Because, either way, you are taking something relatively inert and monetizing it towards your ends.
Flip a House
The American Dream Of House Flipping
There are entire television shows devoted to this concept and for a good reason. Flipping a house is one of the fastest ways to make money in real estate. Suppose you know what you are doing. People often ignore that second part, and many new investors get themselves involved in projects that are way beyond their capabilities. Flipping a house is about more than identifying a “deal” or opportunity. It is also about seeing into the future. It would help if you constantly analyze the surrounding neighborhood and how the market is reacting to it. In other words, you’re not going to turn a declining area around with your flip-it project, no matter how masterful the renovation is. That’s another aspect that buyers often forget, too.
Is House Flipping Expensive?
The renovation of a house is expensive, but it can also be a logistical nightmare. Many successful house flippers do so because they perform much of their work. And they stay away from projects outside of their expertise. Sadly, this kind of knowledge comes with experience, and flipping a house can be one of the single most expensive ways to learn on the job out there.
House Hacking
What Is House Hacking In Real Estate?
House hacking is an old concept with a new name. It involves purchasing a multiunit property and living in one unit as your primary residence and renting out the others. In the sum of the bargain, owners get their mortgage paid off as well as a place to live. This procedure can be compounded with future investments and daisy-chain into more extensive projects over time. But it also comes with many downsides, like the liabilities of being a landlord. Furthermore, this technique is quite capital intensive compared to other methods.
Vacation Rental Properties
What Are The Difficulties Of Owning Vacation Properties?
Like home rentals, vacation rentals can be an excellent income source depending on how they are structured and what market they target. For example, seasonal rental properties might have periods where they generate no income at all. Unlike standard rental properties, vacation rental properties often involve more intensive logistics because of tenants’ frequent in-and-out nature. Because of this, many owners turn to a property management firm, especially if they can’t do it themselves.
What Are The Advantages Of Owning Vacation Rental Properties?
Couple these costs with the often higher insurance rates on rental homes, and you have a more exotic, much more complex version of a home rental. That said, these properties can command vast sums of money due to their seasonal nature or location and often present cash-rich investors with ample opportunities for making reliable income.
Investing in Real-Estate Investments Trusts (REITs) or Other Stocks
What Does Reit Mean In Real Estate?
Perhaps one of the most accessible means of investing in real estate is to buy shares of stock in real-estate investment trusts, also known as REITs, or in real-estate holding companies. In exchange for your money, these companies will pay you a dividend that shares the money they make on developing or leasing out properties.
What Are The Advantages Of A Reit?
REITs often pay out very high dividends, making them attractive to many investors. With the rise of fractional shares and the democratization of access to the stock market with apps, REITs will probably grow in dominance as one-way companies finance projects in the future.
Building a Home on Spec
If you have all of the skills necessary to flip a house, why not build one from scratch? That’s what building a spec house is in its purest form. And this makes it a very lucrative niche. After all, you build the house and control the expenses. Like any product, the final profit margin is more of a combination of the builder’s ability to execute and the market’s receptiveness to the product.
Real-Estate Financing
You can also directly finance real-estate debt with real-estate financing. Whether you are helping a company bring a project to life or collect on security payments. Real-estate investing leads to REITs and stocks’ power and stocks combined with a more scalable capital portfolio.
The Bottom Line
There are many ways that investors can participate in the real estate market without borrowing vast sums of money. Investors don’t even need to own a home to take advantage of the massive potential gains that a booming real-estate market can offer. Like many other finance areas, real-estate investing is now more accessible than ever before; Even to the general public and at various price entry points.
