How To Make Money In Real Estate: A Guide For Beginners

Knowing how to make money in the real estate industry takes a lot of hard work – but the hard work pays off. With the proper steps, you can grow your wealth, hedge against inflation and take advantage of a growing housing market.

Below, we’ve identified seven ways to start boosting your income using real estate to your advantage. Let’s dive in and see how you can become a successful real estate investor.

1. Leverage Appreciating Value

Most real estate appreciates over time. Appreciation simply means that a home increases in value, sometimes without the homeowner making any changes to the property. When a home appreciates, it automatically increases your equity, which is the difference between the home’s value and your outstanding mortgage principal.

How does a home appreciate in value? There are a few ways:

• Most real estate properties appreciate over time. As the area where your house is located becomes more favorable to buyers, so does your home, allowing you to take advantage of the higher property.

• You can improve a property’s value by renovating. Home renovations can go a long way in terms of increasing your property value. Some examples of home improvements include remodeling the kitchen or bathroom, fixing your home’s curb appeal and installing energy-efficient windows.

Continually improving your home’s value is an excellent long-term tactic to earn real estate income. It ensures you have a decent return on investment (ROI), which helps build your wealth further and faster.

2. Buy And Hold Real Estate For Rent

As a property investor, you have several options for investing in properties, including buy and hold real estate. When you buy and hold, you rent the property out to tenants. There are several ways you can take advantage of buy and hold real estate, including the following:

Long-Term Residential Investment Properties

Long-term residential rental properties are homes you own and rent to tenants for long-term occupancy. These investment properties may be single-family homes or multi-family complexes. Depending on how you choose to outline the lease agreement, you may have month-to-month leases or annual leases that are up for renewal each year. When the lease agreement expires or your tenants decide to leave the property, you may be in charge of finding new renters.

Rental properties are a great way to build wealth because they provide monthly cash flow. The rent you charge might cover the mortgage payment, property taxes and homeowners insurance. Keep in mind that you’ll likely have to front the money for home maintenance and repairs. The difference between the gross rent you charge and your housing costs equals your net proceeds on a rental property.

Many investments, like stocks or bonds, don’t pay a monthly cash flow, so having long-term residential rental properties is a great way to generate a steady income stream.

Short-Term Vacation Rental Properties

If you’d rather not deal with the hassle of having tenants year-round, you can invest in short-term vacation rental properties. The premise is similar to buying and owning long-term rentals – you own a property or properties, but instead of renting on a long-term lease, you rent to travelers for shorter periods of time. Some investors use platforms like Airbnb or VRBO to attract potential occupants to their short-term rentals.

When you buy a second home or vacation home, you can even use it for your own vacationing pleasure. Then, you can rent it out when you’re not using it to earn some cash flow and cover the cost of owning the home.

Like a long-term rental property, you’ll make money when tenants rent the house. You can use the cash to cover the property’s expenses while enjoying the property’s appreciation and your equity, maximizing your rental income.

Land Rentals

If you own land but don’t have a property on it yet, you can still earn cash flow by renting out the raw land. You won’t make as much cash as you would if there were a property on it, but you could charge others to use the land for things like storage or to collect wood.

You might consider using the cash flow toward building a property on the land. Keep in mind that land doesn’t appreciate in value like residential properties do, so building a house could be an investment that’s worth it in the long run.

Commercial Spaces For Rent

Investing in commercial real estate is another way to earn a solid cash flow. When you own the physical property, you can rent it out to businesses. Commercial properties can include office buildings, retail spaces, small businesses and industrial properties.

If you’re acting as the landlord or property manager, you’ll likely be in charge of maintaining the building and making any necessary repairs – though you won’t have to worry about the businesses themselves.

The tenants pay you rent, just like residential tenants would, which you then use to cover the mortgage and any upkeep expenses.

3. Flip A House

Flipping houses is a great way to make a profit if you understand how it works. To flip a house, you will:

• Buy an undervalued property (such as a foreclosure or home that needs extensive repairs)

• Repair, renovate and remodel the property

• Sell the property for more than the cost to buy it and fix it up

Since flipping properties takes several steps and requires careful evaluation of the market, it’s best for real estate agents who know the current real estate market or buyers who previously flipped homes.

4. Purchase Turnkey Properties

Sometimes investors want to sell an investment property prematurely. Whether they can no longer manage the property, want their money for another venture or have had a financial emergency, they may end up selling the property with tenants still occupying the residence. This is known as a turnkey property.

When you buy a turnkey property, you buy a home that will earn cash flow right away. You save time because you don’t have to look for tenants. You also save money since you don’t have to worry about carrying costs (covering the cost of owning the home without tenants).