The real estate industry produces some impressive wealth, however, some people are still skeptical about whether to invest in this lucrative sector. Yet even if you’ve never considered trying to generate an income from real estate before, this could be a perfect time. Here are four proven ways that you could make money from property, even if you’re only starting.
Two Ways Of Generating Cash From Property
There are two basic ways of generating an income from real estate. One is passive – purchasing and holding. The other is active – flipping homes or putting together a property development deal.
It’s even possible to invest in property with no capital to begin with. There are several methods open to you, including:
- Seller financing via lease options
- Bringing in investment partners
- Getting a bank or hard money loan
- Trading a fixed asset
- Taking out a line of credit based on home equity
- Using peer-to-peer lending or crowdfunding (this Roofstock review is an example)
Once you have your capital, there are several primary strategies to allow you to generate an income. Here are four of the top contenders.
A common way of generating an income from real estate is buying and holding residential long-term rentals. People are always going to need somewhere to live, so as long as you source a well-located property that will prove popular with tenants you can make a significant profit. Don’t be deterred if a property is run-down. You can often buy at a low price, carry out affordable renovations and then rent it back out for a considerably higher monthly payment.
The second most common way to make money from real estate is through flipping homes. Of course, there are some pitfalls to be avoided. Since the goal is selling quickly, you want to choose the right property if you want to make maximum profits. One of the best things to do is to choose an ugly home in a nice neighborhood. This is the key to finding great value for money. Make sure you don’t choose a property that will cost too much to renovate, though – failing to understand the potential value and underlying costs is a recipe for failure. Make sure you do your research well from the outset for success.
If a property’s current owner has fallen behind with their mortgage payments but, as yet it hasn’t entered into foreclosure, you can profit from a short sale. It’s a fantastic opportunity to make quick profits with no length renovations required, although it can be tricky to succeed in this strategy. It’s good to know how many missed payments before foreclosure kicks in. Usually, you’ll need cash to pay for the property, and you’ll also need to ensure you’ve had the property inspected and reviewed to avoid serious risks. Nevertheless, with instantaneous potential returns on short sales, it’s a strategy that’s well worth considering.
The vacation rental market is thriving and represents a very lucrative way of making a profit within the real estate sector. You can make a significant sum from a rental property, especially if you buy in a popular tourist locale. With websites like Airbnb out there allowing you to list your vacation home for rent where would-be travelers can find it easily and make an online booking, it’s never been simpler to make money from real estate. Of course, you’ll need to ensure you have the right insurance to cover you in the event of a problem. While you can save money on insurance for a vacation rental property by choosing the right provider, you still need to make certain you have sufficient coverage for any losses you could incur. This is a notoriously risky market and, without the right protection, you could end up making losses, not profits.
Making Your First Real Estate Investment
If you’re ready to make your first real estate investment, there’s never been a better time. Whether you decide to opt for a vacation rental, a long-term residential rental property, a flipped property or a short sale, these are just four of the ways that you can get into the lucrative realty market and start enjoying profits.