Real estate can prove to be a profitable investment, generating both profits in rent and appreciation. Making money in real estate investing takes some determination and the right systems. However, after putting in the effort, you have a fair chance of making a good sum of money while broadening your portfolio. Here are four ways you can make money in real estate.
Real Estate Investment Trusts (REITS)
If you’d like to get into property investment, without the hassles, investing in a real estate investment trust can give you market exposure without the cost and time commitment of owning your property. Real Estate Investment Trusts are organizations that own, manage or fund real estate assets and projects. They, like exchange-traded funds or mutual funds, let you own a basket of securities rather than a single stock (or property). When you purchase REIT shares, you will receive a proportionate share of the profits generated from those properties.
The most popular form of REIT is an equity REIT, which enables you to pool funds to finance the acquisition, growth, and maintenance of real estate assets. A real estate investment trust focuses on a single form of real estate, such as apartment buildings, hospitals, restaurants, or shopping centers. The majority of its annual income is usually distributed as dividends to investors.
Real Estate Investing Apps
You may have seen advertisements for these. They are online platforms and smartphone apps that enable you to begin investing in real estate through the internet. They work in a straightforward manner: the apps link you with real-estate administrators looking to invest or buy in assets. In return for your capital, you will receive a portion of their earnings (dividends) if they make money.
You should know that the risk is much greater because you will be investing in single property schemes. So you won’t be as diversified as when you invest in a real estate mutual fund.
Home Flipping
Another way of making money in real estate is purchasing houses to renovate and then resell for profits. Although TV shows make house flipping seem easy, “flipping” is one of the most expensive and time-consuming ways of real estate investment. However, it still has the greatest potential for high profits. To be an effective house flipper, you must always be prepared for unforeseen challenges, budget increases, time-consuming errors, a long renovation period, and problems selling the flipped house.
It’s particularly vital you work with a team of professionals you can rely on, such as interior designers, contractors, accountants, and lawyers. Ensure you have ample cash on hand to fix the house problems. Even seasoned flippers discover that a project will take longer and require more funds than expected; thus, it’s important you are prepared to get investment property loans if you choose this method of investing.
Long Term Real Estate Holding
One of the safest but slowest ways to make money with real estate is by investing for the long term. Basically, you buy homes perhaps do minor repairs/painting and then rent the property out to tenants who (hopefully) pay off your mortgage eventually. This requires that you carefully calculate your expenses and then are able to charge sufficient rent to cover your costs plus make a small monthly profit. This system starts out slow, but as your properties get paid off, or if inflation increases enough that rents increase, but your mortgage stays the same your profits will start to accumulate. For instance, suppose that your mortgage is $1,000 a month and other expenses and taxes are $200 / month. If, you are able to rent your property for $1,400 your property nets you $200 a month. This doesn’t seem like a lot but once the property is paid off you will have a nice retirement income of $1,000 a month. If you do this enough times you could end up with a substantial retirement income.
Real estate investing is more available than you realize, and the above are some of the ways to participate in this often profitable investment. Understanding your investment options, risks, and if the entire process is worthwhile will determine your success.
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