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How To Make Money In Real Estate And Get Rich?

Make Money In Real Estate

There is no short cut to make money or to get rich quickly, but you can become richer through successful real estate investing. Investing in real estate stands out as a tried and true approach to make money. In real estate investing you can minimize the risks to an extreme low and get high return on your investment. Location is your first priority for a successful real estate investment. It would enhance your chances of selling the property further. Here are 9 proven ways on how to make money in real estate and get rich.

how to make money in real estate

9 Proven Ways To Make Money In Real Estate And Get Rich

1. Building Wealth Through Rental Properties

This is the classic way of making money in real estate and getting rich. Lords and nobles fought over titles that let them collect rent from those living, farming and otherwise working the land. A few entrepreneurial types drained swamps and built businesses so that they could make more from the land than they would if they merely leased it out to farmers and ranchers. We’ve come a long way in the intervening ways, providing a number of options for those who want to know how to make money in real estate.

You may buy land, build a home and then rent it out. You could find distressed properties, rehabilitate them, and then rent them out. Turnkey properties were purchased by someone else who rehabilitated it before finding a tenant. Regardless of how you acquire the property, it is a buy and hold strategy.

You can own residential, commercial and industrial real estate property. One of the biggest benefits of owning rental real estate is the steady cash flow it generates. It is the best form of owning investment real estate for earning a passive income. The downside of this approach is that you’re putting all your eggs in relatively few baskets. If there are issues with the apartment complex you own, the rental income from it suffers as people leave or the repair costs eat into your profits.

This strategy is probably the one most likely to let you generate a steady income that is large enough to live off of once you own multiple rental properties. You may be able to utilize this strategy if you cash out money from a retirement account or equity in your home. If you want to know how to get rich in real estate, understand that this is one of the most secure routes to doing so as long as you manage expenses and the properties themselves well. You must choose stable markets like Dallas real estate market for rental properties.

2. Getting Rich By Flipping Houses

This is another proven way making quick money in real estate to get rich. Fix and Flip is a specific form of real estate investing. The investor buys a home, pays for repairs and renovations, and then sells the property for a profit. This type of real estate investing is the subject of numerous reality shows. The reality is that this form of real estate investing is high risk. If you’ve underestimated rehabilitation costs, you could lose money. If you put too much money into the investment property because you don’t understand your target market and buyer expectations, you’ve probably wiped out your real estate profit margins.

Whether there are problems with the selling price, the real estate agent, the neighborhood or how the property looks, every month the house sits on the market subtracts the property’s carrying costs from your profit margin. If you try to do the repairs yourself to save money, the theoretical savings on labor costs are offset by the delays in getting the property to market. If you’re not already a skilled building contractor, there is a risk that DIY repairs don’t meet code or potential buyers’ expectations. Then you may lose everything on the deal because you have to pay for someone else to redo what you thought was done. The ideal fix and flip is a property that only needs cosmetic repairs, but these are truly rare.

3. Real Estate Investment Trusts

Real Estate Investment Trusts or REITs allow you to invest in real estate without having to buy and manage a property. REITs may be invested in mortgages, properties, or a mix of both. You can diversify your holdings in real estate by buying REITS invested in particular market niches.

One of the benefits of REITs is their non-correlation with other types of equities. This means that the value of REITs depends on the real estate market, not the stock market. REITs are available in publicly traded and non-traded forms. The Securities and Exchange Commission recommends against non-traded REITs due to their high fees, the challenge of liquidating them and the risk they may become worthless. Publicly traded REITs are as liquid as stocks and bonds. REITs stand out for their regular payment of dividends, something that a decreasing share of stocks offers anymore. Clearly, this also shows a way make money in real estate and get rich.

4. Real Estate Exchange Traded Funds and Mutual Funds

You can buy exchange traded funds (ETFs) and mutual funds that are broadly diversified or targeted to a particular sector. And you can buy ETFs and mutual funds that are themselves invested in real estate. For example, it is possible to buy ETFs that invest in real estate stocks such as publicly traded home builders. Some ETFs invest in REITs, as well. There are mutual funds that invest in real estate developers and property management firms. The benefits of investing in ETFs and mutual funds include high liquidity and low costs. Forget cashing out your 401K or 403B plan to buy rental real estate, since this strategy allows you to invest in real estate within tax advantaged retirement accounts. You don’t need a lot of money up front to start investing this way. Conversely, you may not receive dividends. You may not receive any returns until you sell the appreciated shares.

5. Making Money Through Private Money Lending

Hard money lenders loan money to those utilizing the fix and flip strategy. They may lend money to those buying a property to renovate and then rent out; the property investor in this case would secure a traditional mortgage after they have an attractive property banks will now consider as collateral. Acting as a bank to property buyers yields a higher rate of return than you’d see if you left money sitting in the bank. You have to do your due diligence, since mistakes could mean you don’t have a valid lien against the property.

For those not yet ready to invest a large sum into a single project, crowdfunding is an option. You can loan money to someone who wants to buy rental property or secure a down payment on their own home. In either case, the loans are high risk and illiquid. Another issue is that hard money lending of more than modest among means that SEC rules apply. If you don’t meet the income and net worth requirements set by the SEC, you may not be allowed to loan money to real estate investors unless it is in token amounts through a crowdsourcing site.

6. Increase In Wealth Through Property Appreciation

When the value of a property increases, we call this “appreciation.” While appreciation is not always guaranteed but historically real estate prices have appreciated over the long term. So, again, appreciation alone is not likely going to make you a millionaire but real estate has always increased in the US, averaging 3% per year over the past century. For example, if you purchased a property for $250,000 2 years ago, and today that property is worth $350,000, the appreciation made you $100,000 richer or in other words you assets grew by $100,000.

Another type of appreciation that can come into play is known as “forced appreciation,” the concept of increasing the value by physically upgrading the property through renovation. Any form of appreciation makes you money in real estate and you become richer. Click on the link to find out what’s hot about the Kansas City Real Estate Market.

7. Opting For 1031 Exchange

As a real estate investor you can use this tax code called 1031 Exchange to sell an investment real estate and use the profit to buy a new one which is of equal or greater value. In this way you can defer paying taxes until that next property is sold or you can opt for another 1031 Exchange. When you choose to sell your property, you are required to pay taxes for your capital gains. With the help of section 1031 of the Internal Revenue Code, you are permitted to postpone paying taxes when you reinvest those gains in another property. IRS considers that you are exchanging you old property for another real estate property.

8. Loan Pay Down

When you purchase a rental property with a mortgage, each month you make a payment to the lender. That payment includes two parts: principal and interest. Interest is the profit for the lender, but the principal is money you are paying down the loan with. Over time, your tenant is essentially paying the loan down for you, helping you build wealth automatically.

For example, if you purchased a house five years ago for $100,000 and obtained a $80,000 mortgage (we’ll say it was a 30-year mortgage with a 5 percent fixed rate), today you would owe only $74,000. Ten years from now, you would owe only $65,000. This means that every year your equity increased. You’d gain value, as long as the property value didn’t drop. And if it made $0 in cash flow or broke even and never climbed in value, still after the mortgage is paid off, you’ll now have a property worth $100,000 or more that you didn’t actual save for. Your tenant paid it off due to the “loan pay-down.” This can’t happen if you pay all your cash or savings for the property and don’t go for the mortgage options. This is the smartest strategy of making money in real estate to get rich.

9. Refinancing Your Mortgage For Better Cash Flow

You can also opt for refinancing your mortgage. The number one benefit of refinancing your mortgage is to obtain a loan at a lower rate of interest and also to decrease the monthly mortgage payment amount. One of the benefits of refinancing your mortgage is also that refinancing provides the borrower with fresh money at lower interest rates due to which the homeowner can lower his/her monthly payment amount. Another advantage of refinancing your mortgage is that the decrease in the interest rates allows homeowners to replace an existing loan with another with an added benefit of a shorter loan term and no change in the payment amount.

We recommend 8 hottest real estate markets 2018 for investors looking to build their wealth through portfolio of single family rental homes. Following the housing market decline in 2007, single family real estate investing became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units. You can also read about the latest real estate market trends for all of these cities given below.

References:

On REITs                                                                                          https://www.forbes.com/sites/jrose/2018/04/18/real-estate-investing-without-buying-property/#7b1b9b511496 https://thecollegeinvestor.com/10414/ways-to-invest-in-real-estate

Crowdfunding and Hard Money Lending

https://www.usatoday.com/story/money/personalfinance/2017/08/23/diversified-portfolio-5-ways-invest-real-estate/588610001                                                                                          https://thecollegeinvestor.com/10414/ways-to-invest-in-real-estate

Fix and flip                                                                                                    https://thecollegeinvestor.com/10414/ways-to-invest-in-real-estate

Loan Pay Down

https://www.forbes.com/sites/brandonturner/2016/10/18/4-things-you-need-to-become-a-millionaire-through-real-estate-investing/#3c402999247a

*The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified.


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