Investing in real estate can be a super lucrative way to generate passive or active income while diversifying your portfolio. Thanks to the wide range of ways to make money from real estate, almost anyone can invest.
If real estate investing is new to you, here are four strategies to consider that can help you generate new sources of income, supplement your retirement, or simply earn you a ton of money as a real estate investor. .
1. Buy rental properties
Buying and renting a property, which can include a residential property like a single family home or a commercial building like an office or apartment building, is one of the most common methods of making money. In the real estate.
It can generate passive income if the rental income is greater than the expenses of the property, including the cost of purchase, such as a mortgage. But it also offers additional advantages such as tax deductions and the possibility of benefiting from a real estate appreciation. Since real estate generally increases in value over time, the rental property could be worth much more in 10 to 30 years.
Rental real estate usually doesn’t generate a lot of money right away. A property’s cash flow may be only a few hundred dollars or less at first. But over time, that cash flow can increase through additional rent increases and paying off the mortgage with rental income.
2. Own a vacation rental
Short-term vacation rentals are a cash cow investment right now. The coronavirus pandemic has given the vacation rental business a huge boost as more people seek more privacy, amenities and space than hotels can offer.
Some investors have created entire businesses by buying and renting vacation homes in popular vacation destinations across the country or in their local markets. But you can dip your toes into this industry by buying a vacation property for yourself and renting it out when you’re not around, using a property manager. Just be sure to check local laws on short-term property rentals and investigate the supply and demand situation in the area before buying.
3. Buy a patch and return
HGTV shows like Flip or Flop and Property Brothers popularized and glamorized fix-and-flip real estate investing. However, this real estate investment strategy is more complex than it seems. When you repair and flip a property, you buy it at a discount, make repairs to improve the property and add value, and then hopefully sell it for more than you invested.
To do this well, you must have a thorough knowledge of the cost of repairs and what the property is likely to sell for when completed. Additionally, you need a strong team to help you complete the renovation on time and within budget. This active investing strategy requires knowledge, money, and management to be successful, but if done correctly, it can bring in a ton of money.
4. Invest in REITs
Of all these strategies, investing in real estate investment trusts (REITs) is by far the easiest and most accessible way for investors to start making money. REITs do not require large sums of money to invest, nor do they require the investor to purchase or manage the property themselves.
These particular types of stocks that invest in a wide range of commercial and residential assets are required to pay out 90% of their taxable income as dividends, creating a reliable income stream for investors. Plus, because many REITs are publicly traded, they offer liquidity that traditional real estate investments can’t, with the added benefit of being managed by professional teams.