Are you ready to make a lucrative passive income? Check out Real Estate Investing 101, your crash course to buying homes and making money.
If you were to take a real estate investing 101 class, what would you want to learn? How to make money?
Investing in real estate is considered to be one of the safest investments for your money. You see house flippers and real estate investors all over. There are signs in every town that say “we buy houses for cash,” and there are dozens of TV shows where a happily married couple buys a run-down home, fixes it up and profits over $100,000.
Even Zillow’s getting in on the real estate investing game.
Mark Twain was quoted as saying “Buy land, they’re not making any more of it.” As seductive and glamorous as real estate investing may seem, you have to know what you’re doing to make it profitable.
Keep reading to learn the basics so you can make money in real estate investing.
How do people make money in real estate investing? That’s real estate investing 101. There are three main ways investors make money from their real estate properties.
The first way is to buy a distressed property, fix it up and resell it. With a distressed property, it may be under foreclosure. The owners may have struggled financially and couldn’t maintain the home. When the home suffers from neglect, the property value goes down.
The property value may be down because there’s a lot of work that needs to be done on the house. However, in the right market, that property can be fixed up and sold at a large profit because the home is in a desirable location.
The second way to make money in real estate is to purchase a property and assume that the value of the home will increase over time. This didn’t work out for many homeowners in the housing crash of 2008.
Up to 25% of homeowners were underwater on their mortgages. That meant that the value of the home dropped so much, they owed more to the banks for the mortgages than the homes were actually worth.
Those homeowners bought at the peak of the housing bubble. That’s something that you need to avoid when you’re looking at properties to invest in.
The third way to make money in real estate investing is to purchase a property and rent it out.
The potential downside is that you will still spend money on maintenance and have to deal with the tenant yourself unless you hire a property manager.
There are also housing laws that you need to be aware of if you’re renting out the house yourself. Not keeping up with these laws could put your real estate business at risk. You would be better off working with a property manager who knows what is required, even if it eats into your profits a little bit.
Working in commercial real estate could also be a way to make money from real estate. You could buy a building and rent it out as office space. You could even put your own business like a car wash on the property.
The opportunities to make an income are limitless. Bear in mind that with commercial real estate, there is a higher risk because the properties are more expensive. At the same time, the potential rewards are much higher than in residential real estate.
There is one thing that you need to be an expert about in order to make money in real estate.
If you have a piece of property that’s worth $100,000 today, what do you think the value of the property will be 10 years from now?
Chances are you’ll see an increase in your home’s selling price. That only tells part of the story. Inflation needs to be considered because the cost of everything else will have increased, too.
The reality is that you may not have a profit in your home at all. It just looks good on paper.
It doesn’t mean that real estate investing isn’t profitable at all. You’ll only see this type of scenario if you plan to live in your home.
When you go into a real estate purchase with the mindset and intention to make money, you’ll need to have a plan. That’s what an exit strategy is for. An exit strategy will force you to think about exactly how you will make money on the property when you sell it.
At this point of real estate investing 101, you might be wondering how to get started. If you’re interested in real estate investing, you’ll need to become educated in the real estate marketplace.
You should read everything you can about property investing for beginners. The more you know about real estate investing, the more likely you are to make a profit. You don’t want to make an expensive mistake after an expensive mistake.
You’ll also want to know how you want to make money in real estate investing. Do you plan to rent properties, or if you’re handy, do you want to buy distressed properties and flip them?
Whatever you decide, you want to be sure that you enjoy it. If you love to work with your hand and you have a construction background, distressed properties may be a good alternative for you.
On the other hand, if you want to take a hands-off approach, you would be better off renting your properties through a property manager.
It’s advisable to just start with one property. You can always add more to your portfolio. You want to start strong with your investment right away. When you become successful, you can be a mentor to other investors.
Real estate investing is one of the best ways to make money today. You don’t even start with little money down. There are countless ways for beginners to have a profitable real estate business.
You need to learn and master the real estate investing 101 basics before playing big. Otherwise, you could put your funds at risk.
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