Real Estate Investment involves the purchase, ownership, management, lease and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent.
Real-estate investment is not always passive, and not always easy, but it can be highly profitable. In addition, there are hundreds of ways to invest in real estate. For example, you could:
- Own vacation rentals (Air BnB)
- Own rental houses
- Become a “house hacker”
- Flip houses
- Rent out Duplexes, Triplexes and Fourplexes
- Buy and rent out apartment complexes
THE TOP BASIC WAYS OF MAKING MONEY IN REAL ESTATE
There are many different property types that you can use to make money in real estate with. The secret is finding one that you love.
1) Single-Family Homes – This is the most common investment for most first time investors. Single-family homes are easy to rent, easy to sell, and easy to finance. Single-family homes may be more difficult to cash flow, and can take a significant amount of time and effort to purchase just one unit.
2.) Water/Mineral/Oil/Gas Rights – The cousin of investing in raw land, this is the process of buying and selling a person’s (or company’s) right to use the minerals (or water, oil, gas, etc) on a property.
3.) Large Apartments – These buildings are the larger, nicer complexes you see all around the country, often times in upper-middle class neighborhoods in the suburbs. They often include pools, work-out rooms, full time staff, and high advertising budgets. These properties cost tens of millions of dollars to buy but can produce solid returns with minimal hassle.
4.) Duplex/Triplex/Quads – Small multifamily properties (2-4 units) such as these are one of my favorite investment routes. These property types combine the financing and easy purchasing benefits of a single-family home with the cash flow benefits and less competition found in larger investments. Best of all, these properties can serve as both a solid investment as well as a personal residence for the smart investor.
5.) Raw Land – This is as “raw” as it gets (see what I just did there!). Purchasing land usually does not produce cash flow, but can be improved to add value. Land can also be subdivided and sold as well for profit.
6.) Small Apartments – Another favorite of mine, small apartment buildings are made up of between 5-50 units. These properties can be more difficult to finance, as they rely on commercial lending standards instead of residential lending standards. However, these properties are excellent in terms of cash flow. They are too small for large, professional REIT’s to invest in (see below) but too large for most novice real estate investors. Additionally, the values of these properties are based on the income they bring in. This creates a huge opportunity for adding value by increasing rent, decreasing expenses, and managing effectively. These properties are a great place to utilize on-sight managers who manage and perform maintenance in exchange for free or decreased rent. At this level, real estate can truly become 90% passive.
7.) Small Commercial Office Space – Buying small commercial buildings and renting out office space to business professionals. Often much more hands on.
8.) Large Commercial Office Space – Buying large commercial buildings and renting out office space to business professionals. Which are usually managed by professional Estate Surveyors and Valuers.
9.) Mobile Homes – Generally found in parks but also on private land, mobile homes are found all over the country and can be an inexpensive way to enter the world of real estate investing and can also experience significant cash flow.
10.) Motels/Hotels – Especially profitable in tourist friendly areas, renting out rooms in a motel or hotel can provide significant income.
11.) Notes – Investing in “notes” involves the buying and selling of paper mortgages. While not necessarily a “property type,” notes can be bought, sold, mortgaged, and traded just like the properties they represent. Often times an owner of a property may choose to offer financing and “carry the mortgage”. In this case, a “note” would be created which spells out the terms of the contract. For example, an apartment owner decides to sell his property for one million dollars. He offers to carry the full note and the new buyer will make payments of 8% per year for thirty years, until the full one-million dollars is paid off. If that owner suddenly needed to get the full balance of the loan, he might choose to sell that mortgage to a “note buyer” for a discount. That note buyer will then begin collecting the monthly payments and decide if they will keep the note or try to sell it for profit.
12.) Mobile Home Parks – The entire park in which mobile homes are situated on can also be bought and sold. Often times the individual lots are rented out to mobile home owners, and other times the homes themselves are corporately owned and leased to individuals.
13.) R.V. Parks – An RV park owner simply rents the space temporarily to individuals with motor homes or campers.
MAKING MONEY USING THESE POPULAR INVESTMENT METHODS:
14.) Buy-N-Hold Large Apartments – Similar to the long term approach to single family homes, but on a much larger scale.
15.) Cash Purchase, Sell on Contract – If you have the cash, you can buy properties and then immediately re-sell them to buyers who may not be able to conventionally qualify for a mortgage. You can carry the mortgage for as long as you’d like, or sell the note for cash in the future. Make sure to collect a large down payment when using this method.
16.) Wholesale Single Family Homes- A popular choice for beginners, wholesaling involves scouting your local area, finding great deals, putting those deals under contract to buy, and then “assigning”(selling) those deals to an investor for a fee.
17.) Hybrid Fix-N-Hold for Single Family Homes – One of my personal favorites, this incorporates finding the good deal and remodeling the home from the fix-and-flip but the long term benefits of the buy-n-hold. Simply, a single family home is purchased for a low price during a low market, remodeled to force appreciation, and held until the market improves and sold. This method seeks to maximize the ROI while limiting the risk.
18.) Wholesaling Apartment Buildings – Some investors make their entire living off wholesaling just one or two large apartment buildings per year. With the larger price comes less deals but much higher finder’s fees.
19.) Fix and Flip Single Family Homes– We’ll start with the obvious and most popular one. Buy a cheap home, fix it up, and resell it.
20.) Vacation Rentals – Buying a property in a vacation area and renting it out when you are not staying there is not only a great way to pay for your vacation home but also build equity in a location where prices go up (and down) with more extreme force.
21.) New Construction, Residential – Just like it sounds. It is the process of building a home with the intent of reselling it.
22.) Lease-Option Sandwich – Without actually owning the property, lease-options allow a person to gain control of a property by leasing it with a legal “option” to purchase the property at a specified price within a specified time period. Often times these properties can be re-“sold” using another lease option and the investor simply makes money being the “middle man.”
23.) International Real Estate Investment – You don’t need to live where you invest (but it often does help a lot). Many investors choose to live wherever they like but invest where it makes the most sense – often overseas. While there are many challenges to this type of investing, there are also huge rewards to those who can effectively navigate the international waters.
MAKE MONEY BY CHOOSING REAL ESTATE AS CAREER.
You don’t need to invest in real estate to begin making money from it. There are many paths that will help you earn income while you learn and grow in preparation for when you are prepared to jump in and begin investing. These are the following ways:
24.) Real Estate Agent, Commercial – Primarily assists buyers in purchasing businesses, buildings, and other commercial ventures.
25.) Property Manager– Most investment owners don’t manage their own properties but rely on commercial managers to take care of their investment.
26.) Resident Manager – Often times, apartment owners and property managers will trade free-rent in exchange for a tenant to look after the place, collect rent, do maintenance repairs, and essentially “manage” from within the complex. This can be an excellent way for a young person to learn the investing game without losing any money (and actually making some).
27.) Mortgage Institution – Working on the loan side will give you huge insight into the math that makes investing work – as well as significant contacts to the big players in your area. Usually lenders work for one institution, such as Federal Mortgage Bank of Nigeria, AMCON, Bank of America and others.
28.) Flip Project Manager – By working side-by-side with a house flipper as the project manager, you can be involved in every aspect of the deal, learn the business from the inside, and make valuable relationships without investing any of your own money.
29.) Title/Escrow Agent – The Title or Escrow agent makes sure all the parts fit together to make a sale happen. By working in this field, you can get an inside look at what happens in the background during every real estate transaction.
30.) Appraiser – An appraiser works with lenders to determine the value of a piece of property. Working as an appraiser will give you in-depth experience in determining how much a property is worth.
31.) Real Estate Accountant – An accountant is able to see firsthand the math behind a real estate investment.
32.) Contracting – Nothing will give you a better idea of what it takes to remodel a home than actually being the person remodeling it.
33.) Real Estate Marketer – A real estate marketer works with investors to find leads. From online PPC marketing to bandit signs and more, a marketer can be a valuable part of an investment team.
34.) Real Estate Attorney – A lawyer who helps the investor stay protected and within the confines of the law.
There are many more ways to make it in real estate investment, which we are ready to advice you on once you contact us.
With the above stated points, no one should have an excuse of not being rich or being stranded. Read and apply!