How to make money in real estate – Quick Tips!

Real estate may have made more millionaires than any other industry, yet people are reluctant to get started. Most people think you need to have a large stash of capital to get started in real estate, but this is not the case. There are ways to make money in real estate even with poor credit and no major assets to put up as collateral.

To earn an income from real estate investing there are two main ways of doing so.

1. Buy and hold and use the property to generate income: charge rent or run a business that depends upon the property.
2. Flipping property contracts.

To break this down further there are 8 different strategies that you can use to make money in real estate – although they are all a variation of the two mentioned above.

1. Long term residential rentals

This is the traditional method that everyone thinks about when considering investing in real estate. What you are looking for here is the best possible location. Having a great location will allow you to charge more in rent and will also allow you to find tenants quickly.

Location is even more important than the condition of the property. You can always renovate and upgrade the building on the property to add value and make the property more attractive to potential tenants. You cannot move the property to a new and better location. So long as your rental income is greater than your expenses then you will remain cash flow positive.

2. Lease options

Leasing a property with the option to buy at a later date is a fantastic way to get involved in real estate without needing a lot of capital up front. If you can write the lease contract so that you are not committed to make the purchase, but have the option to make the purchase at a set price some time in the future. This way you can take advantage of a rising market.

For example, in a bull market you will be able to buy that property at a discount or you could sell your contract to someone else and realize a handsome profit.

3. Home reno flips

Thanks to the popularity of HGTV home reno shows this strategy has been brought into the mainstream public’s consciousness. This strategy uses the idea of buying the worst house in the best neighborhood. Once again location is critical as mentioned above.

To really make money with this strategy you need to be very aware of the after-repair value. It’s all about the numbers and building relationships with real estate agents, designers and general contractors. If you are sure of your potential selling price and can keep a tight reign on expenses you can do very well with this strategy.

4. Contract flips:

Obviating the need for very much capital you can flip contracts. Essentially this is finding a distressed seller and a motivated buyer, and then bringing them together. One way to expedite this is to find homes that are vacant or homes that are behind on their mortgage. These owners might be distressed sellers.

5. Short sales

You can make money on a short sell when the home owner is behind on the mortgage but is not yet in a foreclosure situation. This can be tricky because all parties need to agree to the transaction since the property being sold is for less than what the existing mortgage is for.

A short sale can be very profitable but only try this if you are very experienced as you don’t want to be left holding the bag. Depending on how much the mortgage is under water the bank could decide to wait for another buyer so don’t lowball them too much.

6. Vacation rentals

These are short term rentals that usually take place in highly desirable tourist destinations. The potential to build up a significant passive income here is real. You can also build up a network of owners will to supply their properties for such rentals. In this case you become the property manager and provide a high-end customer experience.

7. Hard money lending

Hard money lenders provide capital to people who normally wouldn’t qualify for a short period of time. Usually at a high interest rate. You might turn to a hard money lender if you have what you feel is a “sure thing” but lack the capital to follow through.

You can become a hard money lender once you have built up your capital and your network. Providing bridge loans like this can be very lucrative over a short period of time.

8. Commercial real estate

Commercial real estate developers focus on adding value to the property, not just on flipping them. Having a commercial business on your property is one of the very best ways to earn an income from that property as well as to generate profits once that business sells. Examples include shopping malls, hotels and office towers.