Does property accrue profit? How do real estate agents make their money? Investing in real estate, is worth the risk? How can I make money from property as a beginner or make more money as an existing real estate investor?
These and many more are the sorts of questions that ring in the mind of prospective or progressive investors in real estate. As it is with all business ventures, it is rightly advisable to know the pros and cons before fully delving into it.
So, whether, you’re just being curious about the investment potential of real estate or you want to make a passive income or you want to take it up as a career, understanding how real estate operates is knowledge worth it.
A Guide on How to Make Money From Property
There’s a lot of money to be made from property, which is why it’s popular with a variety of investors. Whether you’re just curious about investing or trying to build passive income or simply exploring different ways to make money or trying to kick off a full-time investing career, there are numerous ways to find success in real estate.
However, all these beg the question: what exactly are the best ways to make money from property? Is making money from property as complicated as it sounds? How can I bring the gains through property rentals?
Below are some of the ways to make money from property.
- Buy a neglected property, fix it, and put it up for sale. This is a quick way to make money from property.
- Bag a bargain, buy low, and sell high. Surf the market with your agent as it would be easier to locate ‘below market value’ (BMV) properties.
- Buy/hold residential real estate: people will always need a place to live and here is an ideal opportunity for rentals.
- Rent a room: renting out spare rooms is increasingly becoming an option these days, especially with market inflation and the stagnancy of wages.
- Vacation rentals: properties situated in well-known tourist destinations could cause cash flow through renting.
- Commercial estate: this is one type of real estate that is becoming attractive these days. Renting out properties to businesses brings in a steady cash flow.
What Type Of Properties Make The Most Money
There are several types of real estate, that investors should be familiar with: commercial, residential, raw land, new construction, crowdfunding platforms, and REITs. Each of these types will come with unique advantages and disadvantages that investors should evaluate.
That is why to take an investment decision, an informed decision is tantamount. Also, if plenty of research is carried out, investing in real estate will be a profitable journey as the real estate enterprise is immensely diverse with endless options. However, as an investor, the most beneficial and profitable is the goal.
Hence, it is important to determine the most profitable property to venture into. Although this can be subjective and most time is determined by individual circumstances, goals, market area, and preferred investing strategy. Nevertheless, choosing the right property type comes down to weighing each option, the pros, and the cons.
Below are the three (3) most profitable types of real estate
- Residential Rental Properties
- Commercial Real Estate
- Raw Land and New Construction
Residential Rental Properties
is ideal for many investors because it can be easier to turn profits consistently, of course, there are numerous rental property types in residential real estate such as single-family homes, duplexes, multi-family properties, and vacation homes.
Residential Rental Properties is a straightforward investment that produces monthly or yearly, this guarantees an income on regular basis.
However, you should keep in mind that the property will need regular maintenance for its value not to drop and an unco-operating tenant may be a problem.
But otherwise, residential real estate when managed properly and correctly can yield attractive profits and it is also best to invest in an area that shows growth potential as this will almost guarantee an increase in value and gain.
In addition to earning steady cash flow residential real estate benefits from a number of tax breaks.
Commercial Real Estate
Commercial properties are definitely one of the most profitable types of real estate investment.
It is a great strategy for investors looking to invest in larger projects like office buildings, retail stores, shopping centers, healthcare facilities, salons, hotels, etc for income-generating reasons. This is because commercial space is generally expected to yield a high return.
With commercial real estate, you’ll generally earn money through the leases to your tenants. Moreover, you’ll be renting to a business and the whole process will be smoother, as businesses tend to care about their image and will therefore properly manage the property.
Furthermore, most businesses tend to pay rent on time and the amount is discussed and agreed upon beforehand which could be monthly or annually.
One of the upsides of commercial real estate is that it can lead to huge progress because as developers build on the property, it helps increase the value of the entire area, this opens up an opportunity for a higher price on the lease when the existent lease agreement comes to an end.
Also, this is an ideal investment for investors who have a strong focus on improving their local communities as it will support such focus due to its potential for higher cash flow, though an expensive venture with quite a number of tedious processes like securing licensing paperwork and zoning document yet the investment has a higher income potential, longer leases, and lower vacancy rates.
So, if you find an opportunity to invest in a commercial space in a booming area, you might want to consider it before it is too late.
Raw Land Investment And New Construction
Raw land refers to any vacant land, unoccupied and undeveloped available for purchase.
New Construction on the other hand is not much different as in this instance, properties have already been built on the land. Examples of such are vacant lands, working farms, and ranches.
These are two types of investments that can diversify an investor’s portfolio and represent attractive profits.
To get started, you must identify a high-growth market area, and decide if you would want to develop, hold, or sub-divide.
Many investors may be unfamiliar with these investment types and should be willing to explore these types, a complete extensive market research should be carried out in order to maximize the attractive market profits. This will ensure you choose a desirable area and prevent the investment from being hampered by market factors.
As earlier noted, real estate is immensely diversified with money-making opportunities other than buying and selling properties.
It is therefore paramount to point out other ways to create wealth in real estate.
Tips On How To Make Money In Real Estate
Real estate investment is a worthy venture because these properties get to improve and increase in value over time. When you’re investing in real estate, you’re putting your money down and allowing it to grow in the future.
With that being said, there are many ways you can take advantage of the real estate market be it directly or indirectly, though it involves research and understanding how the market works.
But, here are five helpful tips on how to profit from the real estate market:
- Fixers-Uppers/Contract Flips
- Real Estate Investment Trusts (REITs)
- Investment Properties
- Online Real Estate Platforms
#1. Fixers-Uppers/Contract Flips
Fixers-Uppers is a situation where you buy the property with the intention of re-selling. That is, it focuses on you buying a property at a cheaper rate -a property in bad condition- and then you renovate to re-sell. In this case, you’re basically giving an old house a make-over to increase its value and attract buyers to it.
But this type of investment is best for those who are experienced in real estate as it requires expert realty knowledge, ( to be able to find a promising run-down property) creativity, (to be able to find easy and cheap fixes to increase the property’s value ) and then a lot of effort ( to be able to market the property for sell in order to make money).
But if done correctly, Fixers-Uppers or fix and flip are guaranteed to make you profit in a relatively short period of time.
On the other hand, Contract Flipping is you working as the middle-man between a distressed seller and an eager buyer. All you have to do is find a distressed seller and a motivated buyer and bring them together.
While locating a distressed seller might seem difficult, all you need to do is find a vacant home or homes that are behind their mortgage payments and with your ready-to-go buyer, you close the deal.
But effectively for this prime opportunity are homes that are already sitting vacant.
Wholesaling is the art of accurately appraising the potential value of a property and buying it for a relatively cheap rate and then re-selling it to a rehabber or end-user who will then make it their dream home without you so much as lifting a finger to do any renovations regardless of how good or poor the condition of the home might be in.
This technique is the best to make ‘quick’ cash for new or inexperienced investors.
Foreclosures can also be an option in this technique.
#3. Real Estate Investment Trusts (REITs)
This is a special kind of company that invests in real estate assets by pooling the resources of investors to buy a portfolio of commercial properties or real estate assets.
Buying stock from such a company makes you enter the real estate investment market without you actually owning a property. So, when you invest in a REIT, you invest in the properties owned and controlled by these companies without the added risk of owning the property yourself.
REITs as a requirement, return up to 90% of their taxable income to shareholders annually, this offers shareholders to receive dividends consistently.
REITs are an attractive investment for these three reasons:
- Investors are free from the responsibilities of maintaining the property since they do not own the property.
- REITs companies cash out 90% of their taxable income which is distributed to their shareholders through dividends. This is a higher pay compared to other investments.
- you can choose to re-invest your income into REITs again which grows your income and investment even further.
#4. Investment Properties
Buying an investment property is the most obvious way to make money in real estate. You could buy a home and rent it out on long-term tenancy or small apartments or multi-unit rental property or a vacation rental which you could rent on a short-term tenancy or even a commercial property such as a retail or office building and lease it to tenants to generate income.
Buying an investment property can be a great way to make money in real estate.
#5. Online Real Estate Platforms
This type of investment is also known as Crowdfunding. Here, you can make money by partnering with a developer or professional investors who have identified an opportunity to buy commercial real estate assets but are deficient in funds.
So, this platform connects the investor with the developer. These investors pool funds to carry out the project in exchange for profits which could be monthly or quarterly depending on the agreement.
The downside of this investment is that most of the best deals are limited to accredited investors only but here you can diversify your investments with not much money.
We started the article by reviewing briefly how to make money from property and we stated the different types of properties.
Now, we’ll get to know the best way to make money from property rental.
Best Tips on How to Make Money from Property Rental
Rental properties refer to a property occupied by someone other than the owner for which the tenant pays a periodic mutually agreed rent.
If you in invest in rental property, you become a landlord. This is great for individuals who have how-to-do-it-yourself (DIY) renovation skills and the patience to manage tenants.
Owning rental property provides a regular and steady income and its capital can be maximized through leverage. But what are the best ways to make money from the rental property:
#1. Rent Out Fully Furnished Apartments And Rooms
Fully furnishing your rental can fetch you a premium charge for renting because a specific segment of the rental market is looking for fully furnished units.
Besides, the Categories of people who desire a fully furnished unit are vacationers, this fetches a high income in a comparatively short term. But vacationers are definitely not the only demographic looking for furnished spaces. Professionals like travel nurses and auditors relocate every few months depending on where they are relevant.
These ‘corporate apartments’ are an excellent way to increase income from rentals because you can contract with a single company to host all their traveling professionals.
These furnished rentals are also in high demand in markets that is experiencing large population growth from relocation and its upside is that it’s for a short period of stay as these renters are looking for where they may land for a few months while still looking for something permanent.
#2. Offer More Space
There’s nothing like ‘too much space’, humans need space for freedom of movement, expression, and occupation and because we acquire possessions every now and then, most times not wholly discarding old ones, space is essential. So, attaching an additional space can create more profit from your rental.
#3. Offer Additional Services And Amenities
Clever property owners these days are figuring out how to make more money from their rentals by offering services like laundry, house cleaning, grocery shopping, etc, this can increase your rental income and boost the renter’s satisfaction.
Also having amenities like fitness centers, swimming pools, community gardens, etc, especially in apartment communities can present an opportunity to increase your rental rate, and your rental income potential while simultaneously increasing resident satisfaction.
#4. Minimize Resident Turnover
Finding new renters every now and then may cost time and money.
Between advertising the rental, showing it to prospective renters, putting it in good physical condition for your new renters, etc, this high turnover can send your operating expenses through the roof.
In addition to all the time and expenses, new renters bring uncertainty such as whether will they pay rent on time. Will they be courteous to neighbors and do they have a good maintenance attitude? You wouldn’t want to replace good and reliable renters.
Therefore, to minimize turnover and increase rental income; provide exceptional customer service by addressing the renter’s maintenance requests, build and maintain a sense of community friendship, and show little appreciation from time to time.
#5. Re-invest Your Rental Income In More Rental Properties
Understanding how to make money from your rentals will accomplish your rental goals whether you plan to create a small portfolio to generate income to cover just your living expenses or you plan to become a real estate mogul.
One of the ways to achieve this is to maximize your profit from rental property by increasing your rental portfolio through re-investment.
If your property appreciates in value, you may be able to rent it out at a higher income but most times this upgrade is tied to the location of the rental property and its neighborhood.
#7. Other Tips On How To Make Money From Rental Properties
Below are a few more ways how to make more profits from Rental Properties.
- Buy and Hold: This is a more traditional way of earning income from a rental property. This can be accomplished by buying a single-family home or multi-family home and putting it up for rent.
- Airbnb and Vacation: you can put up your rentals as home-away and as vacation homes. This can present lucrative profit and the beautiful upside of it is that it’s for s short-term stay.
- Buy big and make small: Another way to make money from rentals is to buy big and make small, that is converting houses into flats. This strategy makes more sense as flats are in high demand and most times individual ownership of homes is difficult to acquire -for example in cities like Abuja-most families cannot afford to rent large properties. Flats, therefore are highly sought after.
How To Make Money From Renting Properties
Renting properties is a sure way of having a consistent, steady income. It is a lucrative Real Estate Investment that is why investors today are flocking to that aspect of Real Estate.
It also increases income with time. Properties appreciate and add value with time due to migration, civilization/development of the neighborhood, industrialization of the area, accessible and good road network, etc.
So, subsequently, properties in such developed areas tend to rise and go up the scale.
You can make income from renting properties through innovation and skill, upgrading your properties to meet the standard quality of that time and attaching leisure areas, etc.
How To Make Money From Digital Real Estate
Digital Real Estate is a new way of doing business in the world of real estate investing. Digital Real Estate sounds like the next big buzzword in investment and is quoted by many as the real estate of the future.
It is seen as any digital asset that you own that can be bought or sold. Just like the physical asset, it is versatile and also increases in value so long as you correctly maintain them.
In a way, digital real estate works like traditional real estate in that you can sell your real estate digital asset for a quick decent profit after you let the value appreciate.
You can build a cash flow from digital real estate through lead generation, ad revenue, and affiliate commissions. The more money you make, the more you increase the property value. With digital real estate, you’re buying an asset and building value so that you sell that property later on if you choose to.
Further, you can make money from digital real estate by investing in the following:
While websites come in different forms, investing in them is a great way to make money as it is the most popular form of digital real estate.
You can do that by launching a website and starting a business, buying and selling websites, selling through eCommerce, etc. Examples include Authority blogs, Affiliate sites, Shopify stores, and so on.
Apps unlike websites are designed for smartphone users. The whole purpose is for smartphone users to download the app.
Now, you can make money from this venture by building an app and selling it, also by selling it through your app, or even launching your own business. Examples include Notebook, Tablets, and Applications on your smartphone.
Domains are one of the most lucrative. They are a website’s URL. Since we are in a digital age, every person or business needs a domain if they are to launch their business. As such, buying domain names in hopes of selling for profit becomes a wise investment strategy.
#4. Intellectual/Digital Products
These could be a course, a membership program, a guide, etc, or anything that you can purchase digitally.
Examples include Ebooks, Training classes, Membership courses, etc
#5. Social Media Accounts
You can buy and sell a social media account just as you would a website. It, you can use it to promote products and services. With a big enough social media presence, you can even launch a career as a Social Media Influencer.
#6. Buy and sell NFTs
NFT is a token that represents something unique and is verifiable on the blockchain.
For example, in the digital world, one can turn any product into an NFT as long as it is verifiable on the blockchain, and it can be bought or sold. It could be an acre of land, cosmetics, a character in a video game, etc. In fact, we are currently living in an NFT-crazy world where even brands are launching their own NFTs. NFT stands for Non-fungible token.
How To Make Money With Virtual Real Estate
The term Virtual Real Estate and Digital real estate is used interchangeably. Digital assets like social media accounts, domain names, and digital currencies are referred to as virtual real estate.
The virtual world is similar to a video game with digital land, digital products, and digital avatars. The virtual world will allow people to purchase goods and services in the augmented reality world.
Making money in the virtual world requires as low as zero capital. Here are a few ways to make money from virtual real estate.
- Build a Website: The cost of building a website is your ‘time’. You’ll need to spend the time to build and grow your website. But you must first decide on what you’re passionate about, how crowded your niche is, and how long it takes to grow and turn in profits. These are factors to consider before venturing into the system.
- Purchase Cryptocurrency: While Cryptocurrency is slightly different from other forms of virtual real estate, it can still be used as an investment for some individuals. You can purchase your Cryptocurrency by downloading the Coinbase app and then you can buy and sell varieties of Cryptocurrencies.
- Start an online/eCommerce store: Starting an online store is a great way to make money both in the virtual and physical world. This online business can be a great way to make extra cash each month and it can be extremely profitable.
- Affiliate Marketing: This requires zero capital. All you have to do is market other people’s products and services and for every sale that comes through you, you get your commission.
- Purchase Virtual Land in the Metaverse: The Metaverse is a virtual world that allows people to interact online. Though Mark Zuckerberg recently introduced the idea it is debated that it has been in existence since the early 90s. There are a couple of metaverse platforms that have begun to sell digital land.
So, owning digital land in the metaverse is another way of investing and earning in the digital space. Virtual land works in the same fashion as real estate in the real world. You can buy and sell your property whenever you choose and for whatever amount.
How To Make Money Using A Real Estate License
A real estate license creates money-making opportunities for you. A career in real estate is very promising because it allows you to make money in several ways, not just through closing deals.
To get a real estate license, you need to pass an accredited real estate school. That means you take college-level real estate courses to learn how real estate works. This means you will learn a lot about the industry and how real estate controls the economy.
Real estate is a thriving business sector and a licensed and skillful agent can work in different capacities as a broker, manager, etc.
While many people get into real estate just to broker deals between the buyer and seller, there are more powerful ways to make money with a real estate license, these are:
- Become a Referral Agent
- Become a Real Estate Broker
- Invest in Real Estate
- Become a Real Estate Instructor
- Become a Property Manager
a. Become a Referral Agent
A referral agent makes money by sending their clients to other real estate agents who they know and trust.
The other agent takes care of the transaction and when the deal closes, the referral agent receives a commission known as the ‘referral fee’.
The referral fee is typically between 20-25% of the other agent’s commission. It is a simple and easy way to earn extra cash while also helping out your agent’s colleagues.
b. Become a Real Estate Broker
Becoming a real estate broker is having the educational requirements and passing the state test, then you’ll be handed your broker’s license.
Having a broker’s license means you can work independently and have other sales agents listed under your license.
And as a broker, you get commissions from deals closed by the sales agents in your team as well as desk fees or advertisement fees from the agents.
So, instead of hanging your license in the office, you can become a broker and help other agents to be successful while building your own wealth too.
c. Become a Real Estate Instructor
You can monetize your experiences as a real estate agent and as a REALTOR, use your credentials to educate and mentor other agents, become a trainer at a real estate school, work as a real estate consultant or go into freelance real estate writing, share your expertise and writing for websites.
d. Invest in Real Estate
Many real estate agents have become investors in real estate over time.
These licensed agents buy fix-and-flip or buy income property to make a profit.
And one of the best perks of being an investor-real-estate agent is that you get first dibs on desirable properties once they are listed and if any have potential, you get a chance to make an offer before anyone else.
e. Become a Property Manager
Another way to earn money with a real estate license is by managing the properties of homeowners and investors.
What does this job entail? It includes managing, repairing, and maintaining the property, finding renters, collecting rent, and keeping the books. The owner of the property will pay you a certain percentage of the rent and you also earn money as a leasing fee.
To earn more, you should get more properties under your fold of management.
f. Completing Broker Price Opinion
Broker Price Opinion (BPO) is a report that only licensed appraisers can prepare to value homes.
As a BPO report maker, you will be comparing several homes for pricing with the relevant statistics and commentary for the benefit of home sellers.
The job is not tasking, with many BPOs requiring an inspection of homes or just having pictures of interiors and exteriors.
As a real estate agent with a license, you can earn through BPO.
g. Create a Downline
Creating a downline means recruiting other agents to your office. It all starts with joining a firm that you enjoy working with and that offers a good commission split.
You may think, how do I make money out of this?
Well, this is how it works:
Most brokerages reward agents who help in the growth of the firm.
So, when agents you recruited close a deal and are profitable to the office, you get rewarded.
This gives you a greater chance of creating passive income from the deals of other agents. So, the more agents you recruit, the more your downline and (passive) income increases.
This is another way to earn your license.
h. A Real Estate License Makes You Eligible for More Jobs
Another license perk is the ability to shift careers.
You could work as a leasing agent, commercial agent, and property manager.
It also gives you the edge to represent yourself in deals and save commissions and costs (which hiring another agent could have incurred), which you could use as a down payment for another property.
Conclusively on this, having a real estate license gives you many creative ways to make more money in the real estate field. It is not just limited to buying and selling properties.
So, how can I make money as a starter in real estate? Many people desire to go into the real estate market to earn but may not know how to go about it.
Well, here’s a guide for you.
Factors To Consider To Make Money in Real Estate As A Beginner
There’s a lot of money in the real estate market but as a beginner, there are factors you should take into consideration before kicking off:
- Risk Tolerance: All businesses or investments carry some degree of risk and real estate is not any different. There are some investments whose degree of risk is low while some carry lots of risks.
- Capital: How much money do you have to invest, some investments require huge capital, while some do not. So, you have to do your market research to go into the line that fits your capital.
- Know-How: Have you received real estate training? How knowledgeable are you about the dealings of the real estate market? You may want to take up a real estate class as this will enable you to know more types of investments.
- Time-Commitment: How much time are you willing to put into this venture? Do you just want to have a passive income or do you want to launch a full-time career in real estate? There are some investments that you can do part-time but there are some that require your full-time attention.
How To Make Money In Real Estate As A Beginner
There are ways to make money in real estate as a beginner, they include:
Invest in Single-Family Homes
Single-family homes are simple and easier to manage and they also appreciate faster. They are also cost-effective unlike that its counterpart.
All you have to do is rent out a single-family home to tenants and use the rent payment to pay for the mortgage.
But also, you need to take into consideration, location as this can slow down or speed up the progress of quick renting and its income.
Invest in “Turn-Key” Properties
A ‘turn-key’ property is company-owned real estate. These are fix-and-flip properties that companies manage and later sell to buyers.
Turn-key properties are less risky, unlike the traditional fix-and-flip. This is because they are easier to finance, can be purchased with a small down payment and you don’t have to worry about completing renovations under a strict budget and time frame.
Manage Real Estate Properties
Many real estate investors do not have the time to properly oversee their properties and are more than willing to pay someone else to do it.
What does managing a property involves:
- Collecting Rents
- Advertising Vacancies
- Finding And Screening Prospective Tenants
- Responding To Repair And Maintenance Request By Tenants
- Performing Any Upkeep Of The Property That A Client Stipulates
Lend to Investors
You can also make money in real estate by being a ‘Private Lender’.
If you have a lot of capital, you can finance mortgages for real estate investors. By lending to investors, you make money without actually buying a property.
You can find prospective buyers through the peer-to-peer lending platform or you could create your own website.
Though these loans could be risky an upside is that they are secured in the mortgage.
Rent out properties on Airbnb
A property located in a desirable environment or tourist spot can be turned into a vacation rental.
You can make a good profit from vacation rentals first you need to put into consideration, cleaning and maintenance and the state’s laws on vacation rentals.
The Real Estate Market is versatile and has very ample money-earning opportunities.
There are various money-making strategies in the real estate market space for prospective or existing investors either through; buying a property and waiting for it to appreciate in value, rending out properties to businesses or tenants to generate cash flow, investing in residential properties, investing in real estate projects or find other work in the industry such as; real estate agent etc.
Likely, you can also invest in the real estate market with zero cash through the means of seller financing through lease options, trading fixed assets like cars, jewelry, etc, utilizing a peer-to-peer platform, going into digital platforms, etc.
All these and many more are the ways to make money in real estate.
FAQs on Make Money from Property
How Much do Real Estate Investors make Per Month?
The average annual earnings of a real estate investor is between $70,000 and $124,000
What is the Fastest Way to Make Money in Real Estate?
Airbnb and Vacation Rentals
Lease to Buy
Is Owning Property a Good Investment?
Owning a property is generally a great investment option.