Real estate is by far one of the biggest and most profitable industries in the world. And while other major world markets may be accustomed to crashes and low seasons, this thriving industry is always on an upward trend: yielding more profits and growing exponentially every year.
So, why do people hesitate to invest in real estate? Well, it may be because of lack of in-depth knowledge about the industry and how it all works or maybe it is just apathy. If you happen to fall under the wanting-to-invest-but-lacking-knowledge bracket, here are five ways to make money with real estate:
1.Renting Out Property
The easiest and most straightforward way of turning in profits is by renting out the property. This involves finding someone who’s willing to pay you a certain amount of cash in return for them using your property for residence or even business.
To maximize on rent, it’s always wise to rent out smaller units. That way you’ll collect more money from individual tenants than you would have if you had one tenant or one family. If handling tenant evictions, collecting rent, and dealing with tenants isn’t your cup of tea, we’ve got 4 other alternatives.
2.Fix and Flip
A fix and flip basically involves renovating a house before selling it. Look at it this way! You may have or even buy a house that’s not necessarily in good shape. Obviously, a valuation may not bring up favorable numbers.
Therefore, instead of selling the house at a throw-away price, you can renovate it first to increase its market value and then sell it at a profitable price. This means that you can buy a crappy house for $100,000, renovate it using another $100,000 but later go on to sell it at $350,000.
In such a case, you’ll have made a whopping $150,000 (before taxes) profit within a very short period of time.
3.Tax Incentives and Benefits
In every state, there are tax laws that govern the ownership, inheritance, and sale of property. Obviously, you are bound to come across one or two of these taxes at some point in your life on the property market. It’s then that you’ll realize that taxes lessen your profit from a sale.
Luckily, with the right advice on your state’s property tax deduction and incentives, you can drastically reduce your tax obligation hence ensuring you maximize your income from a sale.
And while some may argue that this isn’t an effective way of earning from real estate, this method can be termed as profitable if you believe in the adage that “a penny saved is a penny earned”.
4.Appreciation and Resales
It’s a known fact that property value appreciates over time. Therefore, even if you don’t do anything with your piece of real estate, you’ll still make a profit when you resell it. Luckily, there are a lot of factors that may favor rapid appreciation including renovations and regional development plans.
A resale means selling something that was previously bought: in this context, real estate. So how do you profit from it? Now, you need to bear in mind that you can only make some money from the property resale if your selling price is more than your original buying price.
When trying to make profits from a resale, good timing is always paramount. Knowing when to buy and when to sell is the key to landing a great deal. Due to the industry’s trends and predictability, it’s quite easy for investors to know when, where and how much to invest in real estate.
5.Increasing Your Equity
Another great way of earning from real estate is by raising your equity in a piece of property. How? Well, it’s a fact that most properties are bought using amortized loans.
Now, assuming you decide to rent out the property and use the monthly income to repay the loan’s interest and principle. You’ll be slowly gaining more equity without having to dig into your own finances. That’s because your tenants (through their rent payments) will be slowly paying off the mortgage – hence buying you the property little by little.
These are just a few of the many ways to make money with real estate. But, it all boils down to you. This means that your success or failure in the industry will be greatly dependent on how you go about dealing with real estate.