Today I’m going to talk about the many different ways you can make money in real estate. Before you get started with investing, it’s a good idea to know all the different options you have besides just buying a property and renting it out.
When I first got into real estate, I thought there was only one way to make money — borrow money to buy a property, fix it up, and rent it out. The tenants would then pay my debt and expenses, and the property would just appreciate. Now you’re probably asking what’s wrong with that? Nothing, and that’s how I have purchased and maintained a majority of my properties but I still wanted to familiarize you with the many different ways to make money in real estate.
The following list will give you a variety of ways to make money in real estate which most people are not aware of:
- Rehabbing Properties – this is the primary way most real estate investors purchase property. This is what I primarily do and highly recommend hiring a property manager so you’re not involved in the day-to-day details.
- Wholesaling – this is kind of a sneaky way to make a quick buck on a property that somebody else is already trying to sell. You basically become the middleman by finding a good deal and going under contract and then advertise it for more money that you are paying. I am not a big fan of this method even though the buyer and seller’s are both happy with their purchase and sale. To me it seems like you’d have to tiptoe around because if the buyer ever knew what you were doing he’d be pretty upset.
- Lease Optioning – this method involves leasing a property with the option to buy it at a fixed price hopefully below market value. Lease optioning has become more and more popular in the past several years and are a great option for some people who can’t qualify for a mortgage.
- Hard Money Lender – as a hard money lender, you take on the role of being the bank. You lend all the money for the property which is secured by real estate, and get paid for putting deals together. Now you obviously need to have a large sum of cash to take this approach and after several years of successful real estate investing many investors become hard money lenders.
- Buying Preconstruction Property – when you buy preconstructed properties, you have to put down a deposit before anything gets built. Some projects require only 5% down and I’ve seen others up to 30% down preconstruction. So here’s how it works and where you can make some money. Suppose you have contracted to buy a preconstructed house and the developer raises the prices within a year. You can go ahead and sell your contract for more than what you secured it for or you can wait until construction is complete and then sell without ever having to move in or make a mortgage payment. now this can be a great way to make several thousand dollars but there’s also a caveat. In this area of investing, be especially aware of the current supply and demand situation. Also recognize you have your down payments tied up in your deposit. And most important of all, to minimize your risk, make sure you feel comfortable dealing with the builder or developer you are working with.
These are some of the secret ways to make money in real estate and I will cover some additional methods in part two of this series.