There are really only a handful of ways to make money through real estate investing, but that doesn’t mean that real estate isn’t a good investment. In fact, it’s one of the best ways to make money.
However, there are still skeptics everywhere. Entering into the fray is not something that everyone can do overnight; it involves a lot of thinking and paying attention to the market. The housing market issue a few years back has made many people cautious, but the truth is that real estate investment is still one of the best ways to make money,
If you know what you’re doing or you have someone guiding you on how to do it properly, then you can make money in real estate easily, even if you are just a beginner.
The 3 Major Ways to Make Money from Real Estate
There are three major ways how you can make money.
- An increase in the value of properties
- Leasing out to property tenants and collecting rental income
- Generating profits from the business activity
You can also combine any of the three ways outlined above, but in general, those are the most common ways of making money through real estate.
That being said, there are always other ways how you can gain profit from real estate directly or indirectly, such as the tax lien certificates. However, if you’re looking into passive income as a real estate investor, those three ways seemingly the most successful in the real estate industry.
Making Money Through Property Value
First of all, despite all the rumors, it’s very important for you to understand that the values of properties don’t always increase. Take an example of the periods from the late 1980s to early 1990s, and again between 2007 and 2009, when the real estate industry collapsed. As a matter of fact, in most cases, it’s rare to see property values beat inflation.
However, there are a few ways to ensure your property is still profitable. When the current long-term debt has exceeded the projection of the rate of inflation, you may be able to find individuals who are willing to gamble. These people are open to the ideas of acquiring properties, and even financing their purchase by borrowing money. These people may be purchasing a house to flip or are interested in investing in property, like you. Nevertheless, if you fix up the property or are able to sell it when the market it just right, you’ll be earning a lot of money.
Making Money from Rental Income
If you ever played Monopoly, then you already understand the basics of how renting works. Making money from rental income is possibly the simplest way to make money through real estate investment; basically, you can charge people money to borrow a living or working space.
You can set your own targeted rent amount, paying attention to any rental laws and the nearby market, and in exchange, you allow people to use your facility or property. This includes an apartment building, a house, hotel, office building, or any other type of real estate investment that you have.
Say your target is Dana Point in California: when looking for Dana Point real estate property for sale and you find a house or a condo that fits your criteria, you can put it on the market for people looking to stay in Dana Point for an agreed upon amount of time.
Of course, it there are a few things you need to be aware of. When you have rental houses or apartment buildings, you are not only dealing with the rent, but you might be dealing with the maintenance from broken toilets to tenants who turned their space into an operational meth lab, which sounds insane, but has actually happened before.
Although renting properties is probably the simplest way to make money, there is still a lot of work and consideration that has to be taken into account, so as long as you do your homework, you’ll be making money in no time.
Making Money from Business Operations
Other than the two steps above, you can also gain profit through business activities and special services. Let’s say you own an office building; you can make money from the parking garages or vending machines through different fees or purchases.
The same goes for a hotel: you can sell on-demand items, like movies, or different snacks or novelty items to your guests. And, if you own a car wash, you can gain profit through investment like time-controlled vacuum cleaners or small cleaning products like air fresheners.
All of these things require special knowledge, though, but if you have it or you can find someone who can help you that specializes in these types of investments, it can be very easy for you to make more money than you know what to do with.
The Opportunity is Endless
For many people, the topic of real estate can be easy to understand. Why not? It is very straight-forward and simple. All it needs is an involvement of a fair exchange between the landlord and the renter. As long as the rent is paid on time and the water keeps flowing, everyone reaps the benefits.
However, real estate investment is much more than just that. It is more complex because it involves different types of investments. It can include industrial, commercial and residential. We can also be speaking of trades on stock exchanges and many more. The opportunity in real estate investment can be endless. It goes without saying that each type of the investments has its own potential, benefits, unique quirks and pitfalls. But if you do your research and follow the correct step-by-step, you can easily build a fortune.