Whether you’re serious about investing or simply exploring different ways to make money, learning how to make them in real estate is a great skill that can come in handy at any point in your life. Real estate has produced more wealth than any other industry, but people still remain somewhat skeptical about entering into the fray.
Let’s go over 5 proven methods of making money through real estate.
Long-term residential rentals
One of the most common ways to make money in real estate is to leverage long-term buy-and-hold residential rentals. This involves a more traditional approach to making money in the real estate market. It means buying a property and then holding that property for the long term.
When you're considering this option, look for a prime location. That's more detrimental than the current state of the property itself, especially for tenants. In fact, run-down homes in great locations are one of the best investment properties to acquire since people will always need a place to live, and they want more and more to be involved in renovating the house themselves.
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 can be a great opportunity to make a quick profit without investing in lengthy renovations.
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. However, you can always ask for a property manager’s expertise and discuss the game plan with them for better navigation of the whole process.
Lease to buy
A rent-to-own agreement is pretty much exactly what it sounds like, you rent a home for a certain amount of time, with the option to buy it before the lease expires. Rent-to-own agreements consist of two parts: a standard lease agreement and an option to buy in the future.
The option to buy in a rent-to-own agreement means the buyer pays the seller a one-time, usually non-refundable upfront fee, and this is called the option fee, option money, or option consideration. This is what gives you the option to buy the house at some point in the future. It’s an excellent option for prospective tenants who may not have the big down payment or high credit score needed to buy just yet.
Once you get more experience in real estate investing, you can own multiple properties in different key locations and grow your portfolio. Renting out properties for vacation is great to generate some side income, as families going on vacation would gladly want to spend their time in a nice location.
As the stay will be for a short while, the maintenance cost will also be less. Once people are aware of the comfort your property provides alongside its prime location, the demand for renting will increase drastically, and so will your profit.
There are plenty of platforms you can use to promote your short-term vacation rental home. You can list your home on websites like Airbnb and Vrbo or Booking. Be sure to take good photos and go above and beyond in making your guest's experience memorable and comfortable. You can also hire a property manager to help you manage your rental and bring profit to the business.
It’s not mandatory to have massive capital if you want to dabble into real estate investing. Owning a bigger property or house can allow you to get into the real estate business by going for house hacking or lease options. As the name suggests, in house hacking, some part of the house is hacked to generate passive income. Simply put a part of the house is rented out, whether it be a single floor or the basement, even the garage in the backyard, or the guest house if your property has one.
The key to successfully renting a property is the condition of the space since people will vastly prefer a pre-set property in a lively condition. And as the market demand rises, you can increase the prices over time.
Real estate investments can be tricky if you are just starting. The growth of the real estate business has escalated so much that people need property managers to guide them toward better future investments.
A property manager can aid you in navigating this business smoothly, ensuring you profit from the methods you use. They are skilled professionals with tons of expertise in real estate, and leveraging their knowledge can only do you good.
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