Real estate has produced more millionaires than any other business. According to data from the National Council of Real Estate Investment Fiduciaries Index, retail real estate has produced average annual return of 10.8% over the past two decades.
As with any other business you need to plan your work and work your plan. For starters, there are many ways to make money with real estate.
Here are 6 proven ways to get you started
1. Rental income
People will always need a place to live. Plain and simple. You can charge people rent in exchange for allowing them to use the property or facility. The location of the property is important.
Not only does a good location make it easy to quickly find tenants but it also helps increase the asset value much faster.
2. Home renovation flips
Another way you can make money with real estate is through flipping a house. While a few do achieve success by sheer dumb luck, this method typically requires a combination of skill, thorough analysis, and research.
Here are 4 tips for big success using the fix-and-flip method:
• Know your market. To know your market better, you may want to ask yourself these questions: Is this an area with good schools that will attract families? Is it a transitional neighborhood with good potential that may not be quite “there” yet? Is this an already established area with rising prices?
• Have a financial plan. Only shop for homes that meet your budget. Look at comparable sales in the market to see what the likely sale price will be. Map out your material costs and labor. Compute for the cost of carrying a short-term loan, taxes, utilities and maintenance on the home. Also, remember to include a reasonable margin of risk.
• Don’t overprice. Every market has a general price point.
• Educate your buyer about every detail of the home.
3. Lease options
Let’s start with some basic definitions. What is a “lease option?” Essentially, the buyer pays option money to the seller for the right to purchase the property later. With lease options, you don’t have to have great credit or even put up a significant amount of capital at the outset.
It especially works great when the real estate market is climbing. Here are some creative ways you can profit from lease options:
• Through referral fees. You can get fees from referring people to property managers, lenders, agents, credit repair agencies, and so on.
• Through lease option assignment. You can do this by lease optioning a house from a seller, then assigning the lease option contract to another buyer for a fee.
• Through sandwich lease option. Here, you can lease option a home from a seller, then lease option it with better terms to someone else.
• By charging a fee to connect the buyer and seller.
4. Vacation rentals
Many owners make big money putting their properties on the vacation rental market. This requires little to no effort on your part. If you are in a highly-trafficked tourist locality, you could potentially make a significant amount of money and build up a substantial passive income stream.
Places like Miami and Los Angeles are especially great for vacation rentals. Here are the most important factors to successfully renting out your vacation home and maximizing the revenue it generates:
• Make booking your property as easy as possible.
• Keep your availability calendar up-to-date.
• Respond to inquiries and booking questions promptly.
• Build a compelling listing. It should, for instance, have a competitive price, a well-written description and professional-quality photos.
• Maximize your marketing. Use platforms like AirBnB, HomeAway, and RentalSpot.
5. Hard-money lending
Hard money is a way to borrow without using traditional mortgage lenders. Typically, loans are issued by private investors or companies. If you have some capital, it can be a great way to earn good money. This is because of the high returns and extremely low risk it has on the lender’s side.
The following are some tips to guide you along the way:
• Do not put your eggs in one basket. Diversify.
• Require personal guarantees.
• Seek outside advice. It’s better to have an independent and experienced counsel to evaluate your investment.
• Analyze each note investment carefully.
6. Short sales
A short sale is the sale of property that’s worth less than what is owed on it. Here are some ways to earn money buying a short sale:
• Make cosmetic improvements after buying a short sale home and sell it on a higher price.
• Show the ‘Home for Rent’ sign upon a short sale approval.
• Buy a short sale fixer home.
• Buy a short sale to flip.
There are many ways to make money with real estate. If you are thinking of getting into real estate investing, these 6 proven ways should get you started.