Real Estate is one of the best ways to make money and build wealth. The goal of buying an investment property is to get the most amount of money out of the property based on the risk you are taking, while minimizing the amount of time you need to spend attending to the property. We use the word “risk”, because when you are buying property, you are taking money out of your liquid financial assets and investing it in a very illiquid asset – real estate. Here are a few strategies you can employ to make money out of property:
1. Long Term Rental Properties
Rental properties are the number one method people use to make money off of their investment. Although it can take a lot of cash up front, the returns make up for it in the long run if you buy the right property and have lot’s of patience. So where do you start? Begin with buying a property at below market value, fix it up to increase its value, and choose homes that will give high rent to purchase price ratios – meaning it makes more sense for you to rent rather than buy. Depending on your area, you can choose to invest in single family rentals or multifamily rentals – whichever is more abundant for you to find a good deal.
2. Buy Low, Sell High
This one’s pretty self explanatory. You immediately make profit if you purchase a property for under the market value, but you can make even more money if you stage the property to attract buyers over market value. While homes like these can take months to find, it will be worth the search if you land one. Try keeping an eye out for short sales or foreclosures.
3. Capital Growth
Capital Growth is a type of private equity investment, usually a minority investment, in relatively mature companies. These companies often seek out capital growth in order to fund a transformational event in their business. Most property investors make the bulk of their money in capital growth because these types of properties are usually located in highly populated areas that have consistent capital growth. This means that investors can usually generate more equity in a quicker period of time. These properties can make you more money, there are also more expensive than rental properties like mentioned above, so the risk is higher and not recommended for beginners trying to enter the market.
4. Share Your Home
If you are nearing retirement and find yourself living in a home that is far too big for you, consider breaking it up into individual flats and renting it out. This way, you will be making equity from your biggest asset, while having control over the newly created flats and still be able to live in your home while making money. You have to remember if you do choose to do this, you are turning majority of your home into a business. You’ll have to be able to let go of it and allow others to live in it freely. This could be a tough situation for some homeowners.
Whatever method you choose to make profit off of your investment property, always keep in mind that real estate is what you do with it.