Investing Commentary

How to Make Money in Real Estate

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Are you curious about real estate and its investment potential? There are countless infomercials out there on real estate that don’t successfully capture this business’s essence and profitability. However, the points below will give you an in-depth understanding of how this sector works, as well as many profit-making potentials of this industry worth considering. As the industry is increasing, it’s a venture worth exploring, especially if you have the passion and skill. For example, mobile home flipping can rake in as much as $60,000 on average in the US. If this amount sparks any interest in you, read further for more.

Mobile home flipping

This is a popular strategy property flippers capitalize on to make a profit off houses. It works on the concept of buying old homes at low prices, fixing and upgrading them to sell at a higher net value. As easy as this sounds, mobile home flipping requires a tremendous amount of experience, skill, and creativity to pull off. In the United States, some flippers find it advantageous to upgrade their knowledge in home renovations. By doing this, they get to handle renovations on their own. However, those without this technical skill employ a crew to oversee face-lifts and makeovers.

Another vital thing you should know is that flipping requires that you identify the right house. Without it, you can get it all wrong and make a considerable loss. According to Marc Larson, a successful Illinois home flipper, the trick to flipping homes is to go after the most unattractive houses in the nice areas. That way, after renovating, the property will be at par or surpass existing homes in the neighborhood.

He further opines that that’s where the real value is if a person wants to succeed in this work line. There’s so much more you can learn in this regard. Why not take a mobile home flipping course to gain relevant knowledge to make money?

Contract flipping

For starters, contract flipping is not the same as mobile home flipping. With this strategy, you’re required to locate a distressed property seller, after which you put to find a motivated buyer. From there, you set the platform to bring the seller and buyer together. When the deal goes through, you make your money. Sounds easy? Well, there’s more to it.

Ensure the distressed buyer you identify is selling a vacant home or is far behind on the mortgage payment. Indeed, it’s tricky, but you need to develop a sharp eye and nose for such properties and sellers. With good connections and networking, information of such nature is easy to come by. Moreover, it helps to know that homes that have been listed for very long periods usually have their respective buyers wanting to let go of them.

Buy and hold

This strategy is considered traditional and a more common way to make money in the real estate business. Buyers tend to have varied plans when they buy and hold properties. For example, some opt to purchase single-family units and rent them out when the demand is on the increase]. Others procure multi-family homes and use only one for personal living purposes. The rest are then either sold outright or leased for designated periods. The latter is a better option for several buyers because the other units’ income covers their mortgage.

You should, however, be wary of some disadvantages of buying and holding a multi-family home, as they’re pretty expensive to manage all by yourself. Without experience, you can be overwhelmed with the layers of responsibilities you’ll be required to fulfill. At this point, you have the option to hire a property management company to oversee the day-to-day handling of these properties. These establishments can do the following on your behalf:

  • Rent units and collect funds on your behalf
  • See to urgent property repairs

Real Estate Investment Trust (REIT)

Real Estate Investment Trust thrives on the concept of owning multiple commercial properties and offering shares to ready investors. The shares are usually to fund more property purchases, after which the subsequent rental income is distributed to co-investors. In such instances, you can consider REIT as the ‘stand-in’ landlord for rent-paying tenants. Meanwhile, REITs’ essential thing is finding the right investors willing to come on board this venture. 

Raw land income

This is a highly lucrative area in real estate in the United States and, indeed, worldwide. Before anyone can lay claim to a raw land income, the individual must have exclusive or shared rights to the land. In raw land deals, explorative companies such as mining firms are legally mandated to pay royalties should there be any lucrative discoveries. Moreover, companies who rent the land will be required to pay additional charges to you for erecting structures.

For example, if your land has been used to erect cell towers, lay pipelines, or make way for access roads, you’ll receive lucrative income for all. In situations where ownership of raw land is shared, the dynamics are pretty different from sole ownership. Therefore, it’s essential to be on the same page with co-owners in terms of legal and financial agreements, etc., to avoid hiccups in real estate business transactions.

Commercial property income

It’s common for commercial tenants to pay fees for some contractual options. For example, if there’s an office right next door to a tenant, they can request the right of first refusal, which comes with some premium payments to the commercial property owner. Although you can apply option income to residential properties or even raw land, they’re more familiar with commercial properties. Ultimately, you as the owner stand to benefit financially from this type of agreement.

Short sales

This is one money-making method that requires all parties involved to agree to the transaction terms. Short sales are characterized by landing properties that have not entered into foreclosure. It usually happens when the present homeowner is unable to meet mortgage requirements. For this reason, short sales thrive on the reduced property value.

The home or property in question is sold at a lesser value, usually lower than the owner’s money regarding the mortgage. Indeed, this is an excellent chance for an interested party to make a quick profit. Moreover, this real estate money-making strategy doesn’t require any renovations. Typically, short sales demand outright payment in cash. Furthermore, this is different from a home auction because you can access the property properly before negotiating.

As a caution, never assume that short sales are cheap buys simply because the bank wants to offload them. Also, avoid negotiating at an unreasonably low rate because that can cost you a successful transaction. Remember that other buyers are interested in short sales just like you are. Therefore, you don’t want to lose out on a trade that would have increased your bank account balance.

Mortgage notes interest-based income

Are you interested in earning passive real estate income? This is what mortgage notes are known for, as you can make a monthly income with interest included. Although passive, it remains a steady flow of cash that can last years. With this arrangement, you’ll not even need to maintain the property like a landlord.

Moreover, if the property is around the countryside, you may be spared some local regulations on taxes and estate licensing. Fortunately, payments can range from ten years up to thirty years. Perhaps, that explains the sharp increase in real estate investors focusing more on mortgage loans.

Real estate ETFs and mutual funds

Exchange-traded funds (ETFs) are usually diversified. Besides being restricted to a particular sector in real estate, it’s common practice for buyers to invest more. ETFs and mutual funds offer high liquidity and also provide bids at unbelievably low costs. For better returns, you should look at purchasing exchange-traded funds with direct bearings on real estate stocks.

Fortunately, this money-making approach gives you the liberty to invest in your retirement account(s). Interestingly, you don’t need much money to start investing with this method. It’s also important to note that you shouldn’t expect to receive dividends in the early stages. However, as years elapse, your shares will grow, at which point you can sell your appreciated shares for a handsome income. This strategy requires a significant degree of patience because the rewards are not instantaneous. The least period you can wait it out is five years.

Conclusion

Hopefully, with the points listed above, you’re convinced that real estate can be lucrative only when you identify legal ways to make money from it. Whichever way you look at it, property appreciates, and if you choose wisely, you’ll reap immense benefits for a long time. Indeed, inflation, income rankings, and other economic indicators influence this sector, but negative impacts are usually minimal. With real estate, you should understand the dynamics of the investments you’re making and strive to reduce risks as much as possible. Hopefully, these tips will help you make the most out of the real estate industry.

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