How to Make Money in Real Estate: 18 Investing Strategies

TL;DR on How To Make Money In Real Estate:

Real estate has offered higher returns with about half the stock market’s volatility over more than a century.
Investors can make money by owning investment properties, like buying a multi-family home and renting spare units to cover their housing expenses through “house hacking.”
Pursuing a real estate career, such as becoming a Realtor, broker, property manager, or loan officer, can complement personal real estate investing pursuits as a side business.

It seems like everyone and their mother is “in real estate” and wondering how to make money in real estate themselves.

You can invest in it, of course, whether directly or indirectly. A study that gathered data from over 145 years from more than a dozen countries found real estate offered the highest returns of any asset class with half the risk of stocks.

Alternatively, you can choose a career that relates to real estate. There are dozens of ways to make money with real estate as a career, such as working for a real estate brokerage, title company, or property management firm.

Ways to Make Money in Real Estate Investment: Direct Ownership

Did you know residential real estate properties generate an average of 10.6% yearly return? That’s the reason why a lot of people are interested in real estate investing. However, when most people think of it, they think of buying and owning property directly.

It’s not wrong, though there are other options. But if you like owning property, consider the following ways to make money on real estate investments.

1. House Hacking

What if you could buy a home and an investment property in one and then live there for free? You can, and it’s called house hacking. 

According to a survey, over 55% of millennials and 51% of Gen Z home buyers expressed interest in house hacking. 

In the classic house hacking strategy, you buy a multifamily property, live in one unit, and rent the others to cover your mortgage. However, multifamily is only one of many approaches!

You could buy or add an accessory dwelling unit to your property and rent it out long-term or on Airbnb for additional income. Or rent out rooms to housemates. Deni rented out storage space in her garage, basement, and attic.

You can also rent your entire home periodically on Airbnb and stay with friends or host a foreign exchange student – the stipend covered most of Deni’s mortgage!

If you think you can do this, here are the best five states to invest in real estate. It might come in handy.

State

Typical Home Value

Median Yearly Household Income

Average Property Tax

Rental Vacancy Rate

Kentucky

$196,000

$56,000

0.89%

4.9%

South Carolina

$284,000

$62,000

0.58%

12.4%

Indiana

$228,000

$70,000

0.83%

10.0%

Georgia

$316,000

$68,000

0.95%

8.2%

Delaware

$373,000

$81,000

0.62%

3.1%

Read up on other creative house hacking ideas, and brainstorm some of your own while at it.

2. Buy and Hold: Long-Term Rental Profits

You know how long-term rentals work and have probably lived in a few yourself.

It’s the classic landlord model: you buy a property and then sign a long-term lease agreement with tenants. You must maintain the property, collect rent, and enforce the lease agreement, sometimes serving eviction notices and going through the entire eviction process when tenants default or otherwise violate their lease terms.

Investors typically go one of two routes when finding properties for the buy-and-hold strategy. Some buy turnkey rental properties ready for tenants to move in or with tenants already living there.

Other investors buy fixer-uppers and use the BRRRR strategy, where they renovate the property and then refinance it with a long-term rental property mortgage. That comes with the added benefit of pulling your original down payment back out of the property. You can recycle the same down payment repeatedly and grow your portfolio — an example of earning infinite returns on those investments.

Neither strategy is better or worse; it just depends on whether you’d rather score a better deal in exchange for taking on the headaches of renovation.

3. Buy and Hold: Short-Term Rent

With Airbnb’s rise, short vacation rentals have become increasingly popular. You rent out the property to guests rather than dealing with long-term tenants and chasing rent.

However, vacation rentals come with other risks, like maintaining high occupancy, marketing effectively, furnishing the unit, and the labor of turning over the property between guests. You can hire a property management company to handle these headaches, primarily if investing out of the area.

The tradeoff is between the hands-off nature of vacation rentals and the hassles of marketing, furnishings, and frequent turnovers. However, if appropriately managed, short-term rentals can be a profitable model. 

If you’re interested in short-term rentals to make money in real estate, start with these tips on how to be an Airbnb host.

4. Invest in Mobile Homes

In September 2023, Texas, North Carolina, and Florida had the most mobile homes in the U.S. Interesting, isn’t it? You could always buy this thing rather than single-family homes or multifamily properties.

They cost a lot less, for starters. And because they’re not “sexy” investments, they often offer higher returns on investment and cap rates.

Before you write them off, listen to our interview with “The Mobile Home Gurl” Rachel Hernandez. You might just be surprised.

5. Invest in Mobile Home Parks

Alternatively, you could invest in mobile home parks and profit from renting out pads to mobile homeowners.

Buying a mobile home park costs far more than an individual mobile home. However, the business model comes with plenty of perks—to begin with, you don’t have to maintain any houses!

Check out Mr. 1500’s experience owning a mobile home park for a fun and detailed case study.

6. Real Estate Wholesaling

Real estate wholesaling involves putting a property under contract and then flipping that contract to another buyer for a higher price without ever taking ownership.

For example, you contract a distressed $100,000 property for $70,000. You then sell that contract to another investor for $75,000, earning a $5,000 wholesale fee without owning it.

It may sound too good to be true, but finding deals and building a buyer network takes a lot of work. And if you fail to find a buyer, you have a choice: cancel the sales contract and lose any earnest money deposit you put down or buy the property yourself.

Real estate investments? Awesome. Being a landlord? Less fun.

Learn how to earn 15-30% on passive real estate investments in one free class.

7. Flip Houses For a Living

Everyone understands the basics of flipping houses—buying a fixer-upper, renovating it to “force equity,” and selling to a homebuyer. However, it requires skills like finding great property deals and negotiating with contractors before considering renovation. It also demands managing contractors, navigating permits, understanding which improvements add value, working with lenders, and grasping the local market.

Still, flipping keeps investors capitalized through frequent payouts while rentals build cash flow and appreciation over time. Some flippers get their real estate license for MLS access, but it may not be worth the headaches of exams, brokers, and disclosures unless you plan to work in real estate professionally. 

8. Invest in Land

Land comes with its own advantages beyond not having to maintain any physical homes.

Like mobile homes and parks, land isn’t sexy, so there’s less competition. That leaves higher potential returns for investors, often over 100% on any property.

You also don’t have to hassle with wayward tenants or hear the line “Check’s in the mail!” ever again.

If you’re interested, check out this land investing case study and the REtipster land investing course. Seth Williams is one of the country’s top land investing teachers and investors and teaches in an easygoing, friendly style.

9. Buy Your Own Commercial Real Estate

You can, of course, buy commercial properties, ranging from humble corner stores to towering skyscrapers.

Commercial property types include:

Office Space
Apartment Buildings (any apartment building with five or more units is classified as commercial rather than residential property)
Retail Space (shopping malls, strip malls, etc.)
Restaurant and Bar Space
Industrial Space

Commercial real estate properties don’t have the same tenant-friendly laws as residential real estate does (except apartment complexes). You don’t have to worry about anti-landlord laws or absurdly strict rules — if your commercial tenant defaults or breaks your lease agreement, you can reclaim your property much faster.

10. Self-Storage Facilities

Self-storage units are as close to recession-proof as investments get. When the economy declines, people downsize and need places to store their extra belongings.

Self-storage also has a great business model – the buildings are essentially garages split into cubicles, requiring minimal construction and maintenance. You can automate access and have low management headaches.

If renters don’t pay, you give notice and remove their items, avoiding lengthy evictions. This makes for a straightforward income stream. If interested but lacking funds, consider investing in a self-storage real estate syndication.

11. Fractional Property Ownership

You can, of course, partner with a real estate investor in a joint venture. For instance, you find an experienced investor and offer to pitch in 20% of the purchase price for 20% ownership. You get to invest with less capital and potentially invest passively as a silent partner.

But you have to find trustworthy partners and negotiate the terms of your partnership. That could prove a challenge if you don’t know any real estate investors.

As an alternative way to make money with real estate, consider real estate crowdfunding platforms that offer fractional ownership. For example, you can buy fractional shares of rental properties on Ark7, Lofty, and Arrived. You can buy fractional shares in a property for $20-100 and still get the full rights and privileges of ownership, including landlord tax deductions. Several of these platforms offer short-term vacation rentals in addition to long-term rentals.

In fact, Ark7 and Lofty even offer a secondary market for buying and selling shares at any time. That means they come with full liquidity, unlike buying entire rental properties yourself.

You collect rental income while you own the property and get a hefty paycheck when the property sells or when you decide to sell your shares. Many passive investors find it one of the best ways to make money with real estate and certainly one of the easiest.

How to Make Money in Real Estate: Invest Indirectly

You don’t have to buy properties directly to invest in real estate.

In addition to buying properties, I indirectly invest in real estate through most of the following strategies.

12. Real Estate Syndications

In a real estate syndication, you typically become a silent partner on a large commercial building deal.

It works like this. An expert real estate investor — the syndicator — finds a good deal on a commercial property such as an apartment building. They don’t have enough money to buy the property themselves, so they raise money from partners. The partners usually authorize the syndicator to oversee the deal and manage the property, so the syndicator makes most decisions even though they’re a minority shareholder.

In exchange for their labor, they get a bonus structured into the deal.

As such, real estate syndications offer a (relatively) affordable way to invest in large commercial real estate deals. The minimum investment is typically around $50,000, on par with a down payment on a rental property. But the upside is high potential returns, often 15-20%+, with no labor on your part.

We invest in syndications alongside members of our Co-Investing Club. For every deal, we propose a passive group real estate investment deal, and any member who wants to invest in it can do so with as little as $5,000 — a tenth of the usual minimum.

Then, we sit back, relax, and enjoy the quarterly or monthly income from distributions and the tax benefits like depreciation. We collect passive income, even as we get to show a loss on our tax returns. When the syndicator finishes renovating the property and stabilizing rents, they sell it for a huge profit.

Are you starting to see why I think it’s the best way to make money with real estate?

13. Publicly-Traded REITs

A real estate investment trust (REIT) is a company that either owns a real estate portfolio or lends money secured against real estate.

They trade on public stock exchanges, so you can buy and sell them instantly. That makes them liquid investments, unlike most types of real estate investments.

It also makes them volatile, and share prices correlate far too closely with stock markets for any meaningful diversification.

However, the greatest strength and weakness of public REITs stems from how the SEC regulates them. The SEC requires REITS to pay out at least 90% of all yearly profits to shareholders as dividends. That creates high dividend yields but leaves these funds with little prospect for growth, making it hard for REITs to reinvest profits in new properties.

This is precisely why I opt for private REITs over public ones.

14. Private REITs & Funds

Some real estate crowdfunding platforms offer private REITs and funds that own or lend against properties. Unlike public REITs, you can buy shares directly from the platform. This offers diversification and less volatility compared to stocks. Also, private REITs can reinvest profits rather than pay high dividends.

Unfortunately, some platforms only allow accredited investors due to SEC regulations. But others do allow non-accredited investors.

My two favorite private REITs are Fundrise and Streitwise. Fundrise focuses on residential real estate, while Streitwise buys commercial office buildings. Both allow non-accredited investors, with minimums as low as $10 for Fundrise and $5,000 for Streitwise, which has delivered an average 7.3% dividend yield since 2020.

15. Crowdfunded Real Estate Loans

Private REITs aren’t the only way to make money with real estate crowdfunding investments.

Another model involves funding loans secured by investment properties that are being renovated. When the property sells or is refinanced with BRRRR strategy, the loan is paid off, and you get your money back with interest. If the borrower defaults, the lender can foreclose to recover the money.

My favorite for crowdfunded loans is Groundfloor.

Investors can make money with Groundfloor by funding loans with as little as $10.

This makes diversification easy by spreading money over many loans. Unlike most real estate investments, Groundfloor loans are short-term, usually 6-12 months.

You can also invest in funds and own pools of real estate loans. Some offer liquidity, letting you withdraw anytime. For example, Stairs by Groundfloor and Concreit pay 4-6% interest and allow withdrawals anytime. Although the returns are lower, interest from crowdfunded loans is a more flexible passive income than most real estate options.

Not only that, investing in crowdfunded loans is one of the easiest ways to make money in real estate.

16. Private Notes

No one says you have to go through a third-party loan platform to lend money to other real estate investors.

I’ve written private notes (provided loans) to real estate investors I know and trust. They pay me interest quarterly, at 10% annual interest, and the loan term is open-ended.

But you can structure your loan however you want. You negotiate the interest rate, the loan term, and the repayment terms. If you want, you can record a lien against the property for collateral so you can foreclose if they default.

Word to the wise, however: only lend a private note to experienced real estate investors you personally know and trust. The foreclosure process is even more expensive and time-consuming than the eviction process.

17. ETFs & Mutual Funds

Want to invest in real estate through stocks?

Some exchange-traded funds (ETFs) and mutual funds specialize in real estate or in industries with primary exposure to real estate components. For example, you can invest in homebuilder ETFs or home improvement retailers like Home Depot and Lowes. For that matter, hotel and hospitality companies own plenty of real estate.

While ETFs offer great liquidity, and you can easily invest in them through your tax-sheltered retirement accounts, they tend to move in strong correlation with the stock market at large. That limits their diversification value.

18. Private Equity Funds & Opportunity Funds

Another investment to make money on in real estate is by buying into private equity funds or opportunity funds.

Private equity funds invest in, you guessed it, private companies that don’t trade on stock exchanges. These companies can include real estate businesses.

Opportunity funds invest in real estate in Qualified Opportunity Zones, typically low-income areas. Designated by the IRS, real estate in these opportunity zones offers special tax advantages. For high earners, investing in qualified opportunity funds can provide valuable tax breaks.

Unfortunately, many private equity funds and opportunity funds only allow accredited investors to participate.

(article continues below)

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

How to Make Money with Real Estate as a Career

Investing isn’t the only way to make money on real estate. You can also create a lucrative career in the real estate industry.

While the career options are endless, here are a few of the more common ways to make money from real estate as a career:

Career Options In The Real Estate Sector

Real estate agent (commercial or residential)
Home Inspector

Real Estate Broker
Real Estate Attorney

Real Estate Marketing Specialist
Title Officer

Home Stager
Settlement Agent

Real Estate Photographer
Mortgage Loan Officer or Account Executive

Property Manager (commercial or residential)
Mortgage Processor or Underwriter

Leasing Agent (commercial or residential)
Hard Money Lender

Teach or Coach new real estate agents or investors
Real Estate Deal Bird Dog

Sell software or tools that service real estate workers
Real Estate Developer

Real Estate Appraiser
Jobs with REITs

All of these career paths complement real estate investing as a side gig as well!

How To Get A Competitive Edge In Real Estate Investing

In any business, from a Fortune 500 corporation to successful real estate investing as an individual, you need a good answer to that question. Consider these seven ways that any real estate investor can excel and set themselves apart from the average investor down the street, without needing a massive team of marketers or a huge budget.

Become the #1 Authority on Your Local Market

After reviewing the best cities for rental properties, you’ve probably honed in on a few neighborhoods you like for investing. One competitive advantage you can wield over other investors is your local knowledge of those real estate markets.

Some of the information above can come from research, but most come from knowing people in those neighborhoods and staying in the loop. Find local business owners who are heavily involved in the community and make friends with them. Become a regular at local cafes, bars, and restaurants. 

You should grow to love these neighborhoods, become a fixture in them, spend as much time there as you can, and get acquainted with other in-the-know people there.

Beyond staying on top of neighborhood trends, you should also understand the residents inside and out. You need to know what makes them tick: what they love, what they hate, what impresses them, what doesn’t. Maybe they love tech and will jump all over a rental property with smart home tech. Maybe parking is the biggest concern for them.

Admittedly, this advantage is harder if you’re a long-distance real estate investor

Build a Network for Off-Market Referrals

Most people hate networking with a fiery passion.

This is why the few people who take the time to do it well can simply dominate any given market.

You’re already halfway there if you’ve become a local neighborhood expert. You’re already becoming friendly with local business owners and residents as part of your push to know target neighborhoods well. 

Develop them as “bird dogs,” offering a referral fee if they pass information your way about someone who’s looking to sell.

But don’t stop there. Your business card should specifically ask for referrals for your target property profile, and so should your email signature.

You can even get to know delivery people, especially postmen/women, utility workers, etc., who work the neighborhood, asking if they’ve encountered any vacant properties. You can’t be everywhere, but you can outsource your eyes and ears to everyone you meet in the neighborhood.

Successful real estate investing, like other businesses, leans heavily on your networking. 

Reach Sellers First

You want to compete with cash offers without making the highest offer. So, how can you beat other buyers to score deals?

By being the first offer.

This requires being extremely proactive, but anyone can do it. For on-market deals, you need to set up auto-email alerts for deals in your neighborhoods that meet your criteria. You also need a responsive real estate agent who can get you inside a property within an hour of you calling them. 

You need to be willing and able to drop what you’re doing to go walk through promising properties as soon as they’re listed, and willing and able to make same-day offers.

For off-market deals, such as distressed sales, you want to be the first buyer to approach the seller. That could mean the first piece of direct mail they receive, the first phone call, the first email. To score good deals on distressed sales, check out Propstream (see our full Propstream review here). 

If you’re lucky, the seller will accept your offer before your competitors’ offers start rolling in.

But doing this helps to sweeten the deal by offering to settle quickly.

Fast Funding & Settlement

Word to the wise: conventional mortgage lenders won’t close your deals fast enough. 

You need to develop relationships with several investment property lenders to learn how to make money in real estate investing. If one can’t close your deal quickly, you should have others on speed dial. 

It helps to have good credit as a real estate investor. Even hard money lenders feel more comfortable lending to borrowers with better credit. If your credit score isn’t above 750, take your credit history more seriously and boost it up.

Business credit lines and cards can also serve as fast sources of funding. Check out Fund&Grow to help you open between $100,000 – $250,000 in unsecured credit lines (video explaining how it works here). 

You can also consider local community banks. In some cases, they can settle reasonably fast.  See if you can get them down to two weeks by building trust and relationships with them (and possibly with a lightning-fast title company).

It should be no surprise that the recurring theme here is “relationships.” Build trust with lenders, and keep your borrower profile strong with good credit and documented income so they can streamline your loan and settle quickly.

Renovation Expertise

Not all investors feel comfortable making updates and renovations. Other investors spend too much on them. You can beat them all by being willing and able to knock out renovation projects for less money.

Who can guess what word we’re going to use next?

You guessed it – this is all about relationships with contractors and handymen. You need reliable, talented, and affordable contractors for every specialty and every price point. 

Some jobs call for a quick, inexpensive handyman to go in and knock it out. Other jobs need full permits pulled and coordinating plumbers, HVAC, and general contractors together to move quickly and efficiently. It also doesn’t hurt to get to know the zoning board in your investment areas!

This takes experience, expertise, and relationships. If you don’t have any of those things, partner with somebody who does. You’ll learn how to make money in real estate investing faster and develop those contacts faster.

Hey, we never said it was easy to gain competitive advantages; only anyone can do it. Start understanding how to negotiate with contractors, and explore the BRRRR method while you’re at it. 

Bonus tip: while at it, make sure to tenant-proof your rental to withstand a siege!

 

Rent Automation & Turnover Expertise

Making money as a landlord and rental investor means finding good tenants, collecting the rent on time every month, and minimizing turnovers (when most rental income losses occur).

Our landlord software can help you with everything from advertising vacant rentals to tenant screening, lease agreements to reporting rents to the credit bureaus to incentivize on-time payments (which we just started offering).

Beyond thorough tenant screening and automating your rent collection, you can also become a master at filling vacant properties quickly. Having relationships with all those contractors will help — you can call the right guy (or gal) for the job and have them spruce up the property in a few days. From there, it’s a matter of marketing and showing the property.

Remember, you want to be an absolute expert on your neighborhoods, and part of that means knowing your target clientele in deep detail—not just who they are but also what they want in a home and what they prioritize.

And hey, since you’ve become a regular around the neighborhood and know all those local business owners, there’s a good chance you’ll never even have to advertise. Often, your network will refer renters to you when you tell them you have a vacant unit!

Explore Alternative Real Estate Niches

Everyone and their mother wants to learn how to make money in real estate investing with rentals or flipping houses. They’re easy investing strategies to understand — everyone gets the basics. 

Which means you have endless competition for those investing strategies. 

Instead, explore how to make money in real estate investing in niche ways. For example, Deni and I invest in land, which costs little enough that we can invest without hassling with lenders or mortgage payments. Check out this land investing case study for how one newbie replaced his day job income in 18 months with land investing. 

Or how about mobile home parks? They are another less-than-sexy addition to your investment portfolio, but they can offer a higher return on investment with fewer headaches.

Self-storage units offer another niche for successful real estate investing. You don’t have to worry about tenant damage to your properties or a lengthy eviction process. People either pay the rent or they lose their storage space. 

It’s much easier to figure out how to make money in real estate investing in niches with little competition. 

Make Money on Other People’s Properties

What if you could earn positive cash flow on other people’s real estate portfolios? 

With rental arbitrage, you sign a lease agreement to rent other people’s income properties. Then, you turn around and rent them out to short-term renters on Airbnb. 

It involves more work than renting to long-term tenants. You have to manage bookings, communicate with guests, set up automated check-in and check-out, and clean the units between guests. But it also doesn’t require a rental property down payment, or paying for property repairs. 

FAQs

What Type of Real Estate Makes The Most Money?

Commercial real estate in high-demand locations offers the most income potential.

Can You Make a Lot of Money In Real Estate?

Yes. Real estate investing can lead to a net worth of millions of dollars or greater as properties appreciate over time.

Is It Hard to Make Good Money In Real Estate?

No. Real estate can provide comfortable earnings through sufficient sales volume or varied career paths with financial rewards.

What is The 2% Rule In Real Estate?

The 2% rule states that a rental property should generate an annual gross rental income equal to 2% of the total property cost.

Final Thoughts

You can make money from real estate in countless ways. But start with the ideas above as you explore how to make money in real estate investing.

If you don’t know where to begin, try investing $10 in Fundrise or Groundfloor to start building a real estate investment portfolio. Or, if you’d prefer to buy fractional shares in a rental property, invest $20 through Ark7. Just the act of creating an account and investing a few dollars will help you start down the path of making money with real estate.

You can scale up from there as you see fit, but the important part is taking the first step.

What do you think is the best way to make money with real estate? Why?

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The post How to Make Money in Real Estate: 18 Investing Strategies appeared first on SparkRental.

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