Investing in real estate can be a great way for anyone to make passive income. However, it takes research, time, and dedication toward your investment. That said, there are plenty of ways to make money with real estate, whether you invest in rental properties or let your property appreciate over the years. Regardless of what route you choose, there’s a chance to make major profits. If you want to learn more, read along as we go over the top 4 ways you can make money with real estate.
Contents of This Article:
- Top 4 Ways You Can Make Money with Real Estate
- How Can Beginners Make Money with Real Estate?
- Tips and Considerations for Investors
- Do Real Estate Investors Need Property Management?
Top 4 Ways You Can Make Money with Real Estate
There are several ways to make money with real estate. Whether you own a rental business, Airbnb properties, or fix and flip real estate, there are many investment avenues to explore. Learning about each option and determining your investment goals and plans is essential.
Read along as we go over the top 4 ways you can make money with real estate.
- Property Appreciation
- Rental Income
- Tax Benefits
- Fix and Flip Properties
Property appreciation is one of the best ways to make money with real estate. Appreciation is when an investment increases in value over time. For instance, suppose you purchase a property for $200,000, and ten years later, the property appreciates to a value of $275,000. If you sell the property, you will profit $75,000.
Most properties appreciate, which is why many investors choose this investment type. If you buy an investment property, there’s a good chance it’ll eventually be worth more than you paid.
Appreciated property gives you a one-time profit. However, if you want to earn consistent passive income, you may want to look into rental properties. Investors can generate monthly income with single-family properties, commercial properties, and even raw land.
With residential properties, you can rent to tenants and earn monthly income through rent payments. Ideally, these payments will cover the property expenses, like the mortgage, utilities, and taxes, with some income left over. You can also rent commercial properties to businesses in a similar fashion.
Furthermore, you can earn profits from renting raw land. Businesses can rent your land for production purposes, like farming. Then, they’ll pay you royalties on their profits. This can be a wise investment choice if you generate enough rent and royalties to cover expenses.
Another way you can make money with real estate is through tax benefits. When you own investment properties, you can claim several tax deductions. Some expenses you can deduct are:
- Home Repairs
- Employees or Contractors
- Home Office Usage
- Legal Services
- Travel Expenses
When filing your taxes, you must fill out a Schedule E form and show proof of each transaction claimed. Although the paperwork can be complicated, it’s crucial to fill out each section correctly. After all, the goal is to get a maximum refund and avoid an audit.
Fix and Flip Properties
If you’re willing to dedicate a lot of time toward your investment, fix-and-flip properties are a great way to earn large profits. Fix-and-flip properties are lower-valued properties that investors purchase, renovate, and sell for profit.
Although you can generate massive profits with a fix-and-flip property, they require a lot of time, work, and capital. Therefore, estimating renovation costs and how the renovations will increase property value is essential. If you’re not making smart renovation choices, you could lose out on some profits.
How Can Beginners Make Money with Real Estate?
Even if you’re a new investor and want to make money with real estate, you can! Some investment projects, like multifamily properties or commercial buildings, are a lot to handle. So, it’s okay to start slow. Here are a few ways to invest in real estate, even as a beginner.
- Start with Single-Family Properties- If you’re not ready to jump into multifamily property investment, a single-family home is a great place to start. After all, they’re easier to find, buy, and manage.
- Invest in Real Estate Investment Trusts- Believe it or not, you can invest in real estate without purchasing a property. Real Estate Investment Trusts (REITs) are companies that own income-producing real estate. You can invest in publicly traded REITs by buying shares through a broker.
- Invest in Turnkey Properties- Investors can buy turnkey properties, which are owned by companies, and they are ready to rent right away. These are great for beginners since they can easily manage, finance, and earn profits quickly.
Tips and Considerations for Investors
Before jumping into real estate investing, it’s essential to have goals in mind. Why are you investing in the first place? Do you have the finances to invest? Setting goals to determine what type of real estate investments you’re looking for is important.
Here are a few tips and considerations for investors who want to make money with real estate.
- What are Your Investment Goals?
- Do You Have the Finances?
- What Types of Properties Do You Want to Buy?
- Where Do You Want to Invest?
- What Can You Afford?
What are Your Investment Goals?
Most people don’t invest money into something for no reason. So, what are you trying to accomplish? Whether it’s retirement funding, passive income, or expanding your rental business, there are several reasons why people buy real estate.
You also want to determine how much time you’re willing to put into your investment. This can help you decide what investment is right for you and your goals. For instance, if you want to dedicate a lot of time, you may consider a rental property investment. On the other hand, if you want to invest passively, you may consider a Real Estate Investment Trust (REIT).
Do You Have the Finances?
Some investors make the mistake of misevaluating their finances before investing. That said, the amount of capital you need depends on your investment. For instance, you can invest in REITs with a small amount of capital to start.
On the other hand, purchasing a rental property requires a large down payment and several other expenses along the way. Additionally, investing in a rental property is hard if you’re not in good financial health. So, it’s smart to save up for a down payment and put away money for an emergency fund.
What Do You Want to Invest In?
If you want to make money with real estate, there are many property types to choose from.
For instance, you can start with a single-family home. Or, if you want more of a challenge, you can invest in a multifamily property. Of course, it all depends on your goals and level of time commitment.
Additionally, consider your long-term investment goals. For example, some investors buy properties to fix and flip them for profit. On the other hand, some investors opt for multifamily investments that bring in consistent passive monthly profits. Regardless of your investment path, it’s important to have goals to help guide you along the way.
Where Do You Want to Invest?
If you’re looking for investment properties, you must have a location. Although you don’t have to buy a property near you, choosing your investment location wisely is important. After all, not every neighborhood has the potential or opportunity to earn passive rental income.
So, you’ll want to analyze a few locations and properties to determine a smart investment choice. Some things you’ll want to consider for your property location include the following:
- Crime rates
- School system ratings
- Job and employment growth
- Rental-friendly zoning laws
- Accessibility to public transit
- Proximity to amenities and necessities
What Can You Afford?
Finally, it’s crucial to determine what you can afford. Real estate is a great way to earn passive income, but not if you don’t have the funds to start. On the other hand, if your investment puts you in massive debt, you may want to rethink your decision.
If you can buy the property in cash, that’s great. However, you have to determine what you can afford long-term. For instance, it’s best to have around six months’ worth of rent in savings in case of vacancies or property emergencies.
Most rental property owners don’t have time to perform all the necessary property maintenance tasks. Therefore, you’ll have to consider property management charges. Rental property management in Northern Virginia can help meet your rental and tenants’ needs. Here’s more about how it can help.
Do Real Estate Investors Need Property Management?
One of the best ways to make money with real estate is with rental properties. However, if you’re thinking about investing in properties, you also have to consider property management. Full-service maintenance and management are critical whether you own one rental property or 100.
Ultimately, you must ensure your tenants and properties are well taken care of. Additionally, if you need help finding tenants, collecting rent payments, maintenance, and more, property managers can help with it all.
Bay Property Management Group offers comprehensive rental management services to busy landlords that don’t have time for all the day-to-day tasks. So, if you need rental management in Baltimore, Philadelphia, Northern Virginia, or Washington, DC, contact BMG today.