Whether you’re serious about investing or simply exploring different ways to make money, learning how to make money in real estate is an important skill that can come in handy at any point in your life.
According to the U.S. Census Bureau, individual real estate investors account for 74.4% of rental properties in the United States. Real estate is one of the most common types of investments people make in their lifetime, as home prices generally tend to increase over time. In fact, Zillow reports home values in the United States have increased 19.2% since 2020, and predicts they will rise 13.6% in the next year.
With that being said, there are many different ways you can go about taking advantage of the real estate market. In general, it involves a lot of research on the market, understanding the closing process and any legal ramifications, and of course, having the money to put down to claim your slice of real estate.
That’s why we’re covering the top 7 ways to make money in real estate in detail. With this guide, you’ll have a thorough understanding of what it takes to make a profit off the real estate market.
1. Renovation Flipping
If you have even a remote interest in real estate, you’ve probably seen one or two HGTV shows on television that focus on flipping homes.
Thanks to the popularity of home renovation shows, the fix-and-flip culture has exploded into a massive boom in the traditional renovation flip market. While there can certainly be a lot of money to be made here, navigating these waters, in the beginning, can be tricky.
When you lack the knowledge or the experience, you could find yourself on the losing end if you don’t select the right home.
Our advice? Aim for the least attractive homes in the nicest neighborhoods. That’s where the real value is. It’s important to partner with a well-networked real estate agent who has a strong knowledge of the areas you’re targeting. Is this area up-and-coming? Is the home on the water? Is the neighborhood pricey?
You should also be doing backward math to understand your after-repair value, being sure to leave wiggle room for any unexpected setbacks in your renovation. When renovating, be sure to add features that are sure to increase the value of your home for a sure-fire way to make money in real estate.
2. Airbnb and Vacation Rentals
For those who want to invest in a property but still retain flexible access to their home, rentals can present a lucrative path to profits and one of the fastest ways to make money in real estate.
Not only can you make some side hustle income from vacation rentals, but you could potentially make a significant amount of money and build up a substantial passive income stream if you’re in a highly-trafficked tourist locale.
Places like San Diego and other tourist hotbeds are well known for having a high demand for these short-term rentals.
There are plenty of platforms you can use to promote your short-term rental property. List your home on websites like Airbnb and Vrbo. Be sure to take good photos and go above and beyond in making your guests’ experience a memorable and comfortable one. You can also hire a vacation rental company to help you manage your property and bring business.
3. Long-Term Rentals
More traditionally, long-term rentals are a common form of investment for homeowners. A long-term rental is typically 6 months or more – most commonly one year – and typically requires less upkeep on your day-to-day. Low inventory, excessive student loan debt, and the ever-growing millennial cohort create strong indicators for a strong and growing US rental market.
Your tenant signs a lease and is committed to paying monthly throughout the duration of the contract. This means you receive a stable flow of income for a set period of time, without having to worry much about the house unless it requires major repairs that the tenant is not responsible for per the terms of the contract.
4. Contract Flipping
One way that you can make money from real estate without having to put up very much capital or credit is to flip contracts. All you have to do is find a distressed seller and a motivated buyer, then bring them together.
While locating a distressed seller might seem difficult, Clothier has systemized the entire process for doing this. The trick with contract flipping is to identify the distressed seller and locate a ready-to-go buyer.
To do this, you have to be able to identify either vacant homes or homes that are behind on their mortgages. That’s the tricky part. You’re effectively trying to find distressed sellers, but homes that are already vacant are primed for an opportunity like this.
5. Lease to Buy
A rent-to-own agreement is exactly what he sounds like – in which you rent a home for a certain amount of time, with the option to buy it before the lease expires. Rent-to-own agreements consist of two parts: a standard lease agreement and an option to buy.
The former entails a contract between the renter and buyer who agree to rent the property for a specified period – typically a year.
The option to buy in a rent-to-own agreement means the buyer pays the seller a one-time, usually non-refundable upfront fee called the option fee, option money, or option consideration. This fee is what gives you the option to buy the house by some date in the future.
This is a great option for prospective homebuyers who may not have the big down payment or high credit score needed to buy just yet. It’s also one of the fastest ways to make money in real estate.
6. Commercial Property Rentals
Commercial real estate is one of the fastest ways to make money in real estate. This means flipping properties and developing them, adding value to properties in order to increase their net incomes through renovations and upgrades. You’ll also consult on projects that might take more seasoned real estate investors to see to fruition.
7. Buying Land
If you’re looking to earn a slice of the real estate pie, you can buy a piece of land located in a hot or up-and-coming area. From here, you can either hold onto the land until it gains value, or you can build a house on it and sell it for a profit.
New Venture Escrow Will Guide Your Real Estate Journey
Interested in the fastest way to make money in real estate? Buy your next investment property and don’t go at it alone! New Venture Escrow is your trusted escrow company. Our experienced team of escrow officers will ensure the closing process is smooth as possible. Contact us today to get started on your next real estate journey!
