Wondering how to invest in real estate? Now is the time to accumulate wealth in the real estate business! Getting the basics of how to make money in real estate is much easier nowadays than it was before.
The Internet is filled with information that you can get for free, and it will provide the right knowledge and tools for making money in real estate.
However, unless you are willing to commit both time and effort, you will not be able to reach that point where investment opportunities turn into real and big profits!
The game changes depending on the county and even on the town, so you must learn different kinds of investment strategies and know when to make a move with the right one.
How to make money in real estate with no money?
You know how stocks work, right? You buy one and hope that its price will increase over time, so you can sell it and earn a profit. Same goes for real estate investing! There are so many ways to make money in this business, and below we will list what we think are the best real estate investments for you:
Rental Income
This is the most obvious one. In case that you are really starting from ground zero, rental income is an amount of money a landlord collects from a tenant (or group of tenants). The goal of real estate investors is to buy a particular space and then earn money from the rent.
Buying low and selling high
A strategy that resembles the one stock brokers and traders use. You purchase a property for under market value using foreclosures, quick sales, and your negotiation skills. Then you wait for the right moment and sell it over its market value.
Mortgages and equity
Many of you may be wondering how to invest in real estate with no money. Our answer is by using mortgages.
They are used by house buyers to purchase real estate without paying the entire value of the purchase up front. Instead, the borrower repays the loan (plus interest) over a period until the debt is fully paid. If they do not pay up the load, the bank can foreclose.
Now, equity represents the difference between the value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.
All right, so as some of you may have already deduced, you increase your equity by paying up mortgages, which in return increases the market value of the property, making it easier to sell.
Financial leverage is your friend
By using financial leverage a real estate investor can increase the potential return on the investment. It is a strategy that allows top real estate players to earn much money quickly.
If the property buyer has $50.000 in cash, he purchases a house valued at $50.000, and sells it shortly after for $55.000; the buyer gained $5.000. Impressive, right? Wrong.
Let’s say that the same investor with the same amount of money put down $5.000 in 10 different houses valued at $50.000 each, and financed the rest of the money ($45.000), and sold the houses for $55.000. He would have earned $50.000 as the mortgage would be passed to the person the investor sold to.
Now, this is how to get rich in real estate!
Renting Rule: 3 is more than 1
If you have a house with three rooms, you can rent each one to a different tenant, and potentially earn more than renting the whole place to one big family. Another thing you can do is to divide your house into a duplex or a triplex, and then increase the rent.
On the other hand, if you choose to rent your home to a business, this rule does not apply. Why? Businesses are a different type of tenure, and you can set the rent quite higher, and are a much safer option.
Tax benefits
A neat trick you can do, depending on your country of residence, is to deduce the mortgage interest from the rental income, and make a tax-free profit! Also, you can improve the property as a way of getting tax benefits. It reduces your rental income, but adds the value to the property – which is yours to keep!
Refinance as a way to make a profit!
There are two ways you can profit in this case: from a lump sum on a refinance, and from extra cash flow on a refinance.
Let’s start with the first one. Imagine that you purchased a property for $100,000 and invested additional $10,000 on improvements, and the tenants paid back with rents. The property’s market worth is now around $125,000 because of the improvements. With this in mind, you can refinance to get the $25,000 in cash and invest in on your next $100,000 property!
Now let’s take a look at the second case. Here, you can choose to refinance your property to lower the mortgage bill payments, while keeping the same rent. That way you are creating more cash flow every month!
One man’s trash is another man’s treasure
As the title suggests, this strategy shows how to invest in property without too much effort. The basic idea is to make money by fixing and flipping houses. It offers a great way for real estate investors to reap off the benefits for a short duration.
The downside is that the property might not sell at the right price, exposing you to risk of losing money.
At this point, your experience as a real estate investor comes handy. Knowing the location of the property will help you decide to buy it or not.
Consider investing in short term rentals
Another great real estate investment strategy is to invest in short-term rentals as they offer the best way to make money in the housing market. Websites such as Airbnb can be a good source of income, and many people are earning quite a lot of money that way.
If you are looking for a bigger investment, you can also use the website to buy real estate to rent it out. As appealing as it sounds there are also some downsides to this strategy.
Let’s say that again: location!
This is the most important thing, especially in the touristy areas. Visitors are often looking for a place to stay which has easy access to shops, restaurants, and tourist sites. With that in mind, you must look for a well-placed property and even invest a little bit more to make sure you get sweet, sweet rent.
Rent a room in your home!
Why invest in real estate when you can simply rent a room in your home? This is a great way of starting your real estate investment career as it often requires minimal to no starting investment. How?
Simply rent a spare room, garage space or the basement. If you are looking to purchase your first home and want to get into real estate business, consider buying a duplex instead – living in one apartment while renting the next.
This way you can keep a close eye on your tenant and make sure that he will not try to run off without paying the rent.
Benefits of Real Estate Investment Trusts (REIT)
We are well aware that investing in real estate can be intimidating at first. If you dislike the idea of renting a portion of your own house or don’t want to risk with using debt instruments to invest, we have one more thing left for you: Real Estate Investments Trust (REIT).
Basically, it works as a real estate stock market and is a great way for you to invest without being too involved. The fund sets up to invest in mortgage instruments, bonds and stocks in the real estate business.
As you can tell, there are different types of REITs: Equity, mortgages, and a combination of the two.
First one invests in properties, the second one invests in mortgages, and, as said, the third one invests in both. All of them usually offer high yields as you get paid from the interest others are paying on their mortgages.
The most popular REITs are American Capital Agency, Annaly, Realty Income.
Ending thoughts on a how to make money in real estate
Why invest in real estate? Because with right tools and knowledge you can earn quite a lot of money!
This article will not make you a real estate investor or agent. Like any other investment, it has its risks, and it has its rewards. Knowing what to look for or what to work on when making a real estate investment decision is what will earn you money, or lose it.
Our tips and examples are useful guidelines for real estate beginners, but how you profit from the business or investment depends completely on you. Grow, learn, promote yourself, take calculated risks, and profit.
And finally, our last tip: always look for ways learn more about the business. That is how you can stay at the top of your game.
If you enjoyed reading this article about how to make money in real estate, you should read these as well:
