How to make money in real estate
How to make money in real estate? That’s a very popular question and has tons of answers! You can literally make money with lots of different options, and each option has multiple ways to execute them. On top of that, you can apply each of those options to different areas of real estate like residential, commercial, industrial, etc. I could go on for a while with these but I won’t. Soooo see ya next week!?
NAAA! I’m just kidding…had ya for a minute though didn’t I? You thought I was going to take my dozens of blog dollars and disappear for ever didn’t you? Actually, I’m just going to touch on a few popular options and a few lesser known options on a higher level. In a future post I’ll break each of them down in greater detail, but for now we’re just going to dip our toes in the water on how to make money in real estate.
Popular Options to make money in real estate
There’s a few options for making money in real estate that are pretty obvious. They’re different in almost every way. Certain options require owning properties, some don’t. Others require very long time frames over multiple years, while some require less than a week, and sometimes they might only take a few hours. Some are high risk, some are relatively low. No matter what differences they have, they will all have one thing in common, and that is: they all can help you to make money in real estate.
Thanks to HGTV and their plethora of flip shows this is probably one of the most well known methods. “Flipping” is where you purchase a property that you feel is “undervalued” and make some repairs or renovations. The repairs and renovations could be anything from a new coat of paint and cleaning up the exterior to adding on additions or completely gutting and remodeling the property. It doesn’t matter what you do, the end goal is to improve the value of the home enough that you can sell it immediately and make a quick profit.
Although they make it look really easy and always seem to make money on TV, reality can be quite different. A risk to flipping is the timelines. Selling is not always quick so you could get stuck with a lot of carrying costs which will quickly eat into your profits. Fixing and flipping is a fast paced money making strategy. If it takes too long you’re probably not going to make as much money or could even lose money on the deal.
This IS the most well-known method of making money with real estate. Everyone knows about property rentals, residential and commercial buildings,and industrial and farmland are pretty much everywhere. If you’re unaware of what I mean, this is where you would buy a property and rent it to another person to cover your expenses and create cash flow. I’ve done this myself on several occasions, you can read about it here and here.
You can also make money in multiple ways by owning rental properties. You can read about the different ways to create wealth through this method in an article I wrote. Making money in real estate through rental properties is the slow long game. It’s often less stressful with great tenants, and the management can be contracted out so it’s completely hands off except for the buying process.
Real Estate Agent
A Real Estate Agent is essentially a salesperson for real estate. It also seems to be a requirement to put their faces on bus stops as well. I’m not sure why, but that’s like their bread and butter of advertising a face for people to lean on as they wait for the bus.
Real Estate Agents usually take a percentage of the final sale price as their payment. This can be very lucrative to high volume sellers in upscale neighborhoods. You could become an agent if you wanted to make money in real estate as a full time job. This is probably the easiest to get into because it doesn’t require a lot of upfront cash. It’s still going to cost you some money, and you could go weeks or months without a pay cheque when you first start. Depending on your area there’s different regulations, so check out your local real estate board and see what you need.
Less popular options to make money in real estate
Contrary to the previous three options to make money in real estate which are very well known to the general public, these next options are not. They’re not easy to make fancy or exciting so they don’t get feature on TV shows. They’re also not as easy to get into without prior knowledge of the industry.
When developers are building condo buildings often the first few units sold are cheaper than the last. If you can get in early sometimes you can sell for a profit before the condo is even finished. Also some developers may have “investor rates”. This is usually a discounted price for buying multiple units or buying prior to construction starting. Like anything, buying in bulk is cheaper and developers will often raise their initial cash flow by selling units to these high volume or early purchasers.
If you have a lot of money laying around you can look into loaning it out on private mortgages. I’ll be honest, I don’t know a lot about private mortgages. I know individuals are able to do it themselves. There’s also businesses that will take multiples people’s money into a pool and search out these private mortgages as an investment. Other than that I wish I could tell you more about it but I’m just not very knowledgeable in this area nor do I have piles of cash to loan out as a private mortgage, so I probably won’t know much more in the near future.
There we have it!
There’s a few popular and not so popular ways to make money in real estate. All have their own unique challenges and advantages. Which are you going to make your fortune with?