Real estate has made more millionaires in the United States than any other business. You don’t require a degree or any experience to begin. You only need a desire to learn and a strong work ethic.
In this article, we’re going to look at five ways business owners can make money with real estate.
Long-term residential rentals
If done right, investing in residential rentals can be lucrative. People will always need a place to live. Around five to six million families will become new renting households in the next decade, according to the National Association of Realtors.
When searching for the right rental property, you need to consider these:
- You’ve probably heard people say, “location, location, location.” Although not the only factor, location probably is the most important.
- Know what the average rent in the area is, as rental income will be the bread-and-butter of your rental property.
- Number of listings and vacancies. The vacancy rates will give you an idea of how successful you’ll be at attracting tenants. The lower the vacancies the better.
- Future development. If there are many new developments – malls, business parks, apartment buildings, and so on – it’s probably going to be a good growth area.
- Check the potential neighborhood for current or projected public transport hubs, movie theaters, gyms, malls, park and all other perks that tenants find attractive.
- Job market. Go directly to the S. Bureau of Labor Statistics or to your local library to get an idea of how the job market is.
- Other things to look out for include crime rate, schools, and property taxes.
Investing in vacation rentals can bring significant returns and personal enjoyment. Your objective should be to buy a house in a popular tourist destination and engage the services of a good property manager to take care of management.
Read more on investing in luxury real estate
Tourist hotbeds like Los Angeles and Miami are well known for the high demand for these short-term rentals.
We spoke with Advantage Property Management owner, Karen Joyal, for her expertise on vacation rentals. “To become a successful vacation rental investor, you need to have a proper marketing strategy. Promote your properties on social media, on your website, and on vacation listing sites. Examples of popular listing sites include Airbnb, VRBO, Home Away and Rent Like a Champion. You also need to have a great staff for cleaning and maintaining the vacation rental.”
Home renovation flips
We are now experiencing a massive boom in the traditional renovation flip market thanks to the popularity of home renovation shows. However, if you don’t select the right home, you could find yourself on the losing end. Some knowledge or some experience is necessary.
Fix-and-flip opportunities include adding additional units or renovating the existing units to make the property more appealing to potential buyers.
To succeed in home renovation flips, you need to take into account several things. You need to buy at the right price – thorough research is therefore key. Also, start small. Don’t bite more than you can chew.
In addition, negotiate a long settlement period. A short settlement period won’t give you time to draft designs and organize trades well in advance.
Flipping contracts is another way business owners can make money with real estate. It can be a great way for new real estate investors to turn profits without assuming the typical risks associated with real estate transactions.
Here are some good tips when it comes to real estate contract flipping:
- Be serious and know your role. In other words, treat it as a real business.
- Research the property. This’ll make you be prepared to examine and communicate to your investor group the issues regarding key details like insurance report, zoning status, structural records, and deed problems.
- Know the average ‘Days on Market (DOM) for properties selling in the area.
- Accurately estimate the market value of the property.
- Be in a position to estimate the repairs by a margin of about 20% when evaluating a property. Investors don’t like surprises.
Earning money from a publicly owned real estate investment trust is like earning money from stocks. REITs are offered via an IPO. The funds generated through the IPO are then used to buy properties. Investors thereafter are able to make income through the leasing, renting or selling these properties.
To choose the big-yielding REITs, do these:
- Look at the FFO. An FFO is defined as funds from operations. It’s a figure that tells you how sustainable the REIT’s income is.
- Look at the portfolio. This tells you what their vacancy rates are. A low vacancy rate means the REIT is doing a good job. On the other hand, if it’s high, it means that the REIT may have poor cash flow and stock price in the future.
While real estate can be a great way to achieve long-term wealth and earn passive income, it is up to investors to do their due diligence. Effective due diligence can improve the prospects of superior investment performance and mitigate loss exposure.