How To Make Money From Real Estate [10 Great Tips]
So why did we include a category about how to make money from real estate investing on our blog? The world of real estate investment has made many wealthy individuals. Today the market stands at $8.9 Trillion according to MSCI Emerging Markets Index.
The evidence of the prominence of the real estate investing industry is all around us. So many big names in the world make real estate investment a permanent part of their portfolio.
Yet, there is so much skepticism surrounding the whole idea of investing in real estate. There is an unshakable dogma attached to it. The myth is that you need massive capital to become entitled to a part of that huge pie!
Well, you don’t need that much money to start investing in real estate! What you need is a particular skill set. We’re talking here about the skillset that will allow you to make money out of thin air.
Moreover, you CAN do it with a minimal investment.
There are many options to get you to break into the real estate investment market at almost no cost. These include starting up a real estate escrow or even an agency of one employee.
I know it sounds oversimplified, but it’s not! It’s just as easy and costs as much as an online business if not, in fact, less. Let’s be honest here, both can be extremely hard and expensive if done wrong! Once you know how something’s done, you’re all set to make a bank with real estate investing!
Before we go on to talk about how to make money from real estate investing you need to know a few things. Having a good credit score and an available line of credit is not necessary. You don’t need capital, you can pull this off with no cash at hand on startup. Finally, having access to assets is not needed here.
Listen all these things would help, but not lacking them is not a show stopper.
So how do you make money from real estate investment? Let’s take a look…
- 1. Real Estate Investment Broken Down
- 2. Tenancy and Rentals
- 3. Off-Market Properties
- 4. How To Make Money From Real Estate Investment Through Brokering?
- 5. Escrow
- 6. Flipping Pre-Foreclosure & Foreclosure Properties
- 7. How To Make Money With Real Estate Investment And Commercial Properties
- 8. Wrapping It Up With Some Tips and Tricks To Make More Money With Real Estate Investment
1. Real Estate Investment Broken Down
It’s not as complicated as you may think. Let’s break it down a little, the money in real estate investing comes in two main ways. One of the ways is passive and the other is active. Holding property or flipping it, respectively.
Each of these two investment styles breaks down further into sub-sections. Some of these subsections are what we will be looking into today!
We’ll only cover the no-to-low cost options here, and I may point out one or two options with credit.
2. Tenancy and Rentals
This is one of those passive styles. This one is not rocket science though! Most of us are familiar with it so I’ll try not to elaborate too much to save space for the lesser-known options.
There is so much you can do here, from renting a room to renting a full apartment. Then there’s the obvious buying a. second home and renting it out.
The first and third options are obvious so I won’t dig deeper into them. The middle one, renting out your apartment though, may need a little more elaboration.
So let’s assume you own an apartment or home that you live in. What I am about to suggest is going to be hard for many to consider. However, if you want to make money and are ready to make sacrifices, read on. If not feel free to skip to the next idea.
Here’s an idea for you, why not rent a smaller apartment or one in a less expensive location and rent out yours?
Think about it, as far as using what you have to better your life goes, this is a perfect example!
The difference in rent is more money which you can save or reinvest. Real estate value grows with time, why not make more money from your apartment this way?
Maybe this is extreme and you’re not ready to make such a sacrifice. That’s ok, let’s consider sub-letting and subleasing instead.
2.1 Sub-Leasing And/Or Sub-Letting To Make Money From Real Estate Investment
This doesn’t need to be expensive at all. So how does it work? Locate an apartment that’s within a rent bracket that you can afford. Make sure it’s unfurnished and let the owner know that you intend to rent it out to others.
I’ve spent a few years working in real estate, this technique works like a charm. What you do is you take an unfurnished apartment and furnish it with low cost or even used furniture.
The next step is to find a tenant and rent it out for a profit margin (i.e. a rent higher than what you pay). Once the difference in rent covers the furniture’s value, which you can make back in a few months, you’re in profit.
2.2 Property Management
This is another one that I’ve learned from the years I spent in a real estate firm. Do you know how much work goes into being a landlord? They need to collect the rent every month, carry out maintenance work, and refurbish the place to name a few.
What some firms do, they take the headache away from the landlord. They make the landlord’s life easier by managing the property on their behalf for a small fee. Landlords tend to accept this deal because it takes away the headache from them. Moreover, the fee is not an “out-of-pocket” expense for them since it’s deducted from the rent itself.
You can offer this up to landlords yourself for an amount smaller than the going fee firms charge. This way you make it more attractive for the landlord. As you can imagine, an independent property manager is not as trusted as a big firm name.
3. Off-Market Properties
In 2013 during a business trip to London, UK, I discovered a concept that was alien to me, off-market properties. The concept didn’t exist where I lived, but our UK office proactively sought them out!
So what are off-market properties? As the name indicates, these are properties that have not been listed in the market yet. Usually, these properties are almost always in need of renovation. These are what our UK office specialized in.
Either the home has gotten too old or the district has been decreed for renovation by the government. However, many owners can’t afford a renovation, so they sell the apartment. These are the geese that lay golden eggs when it comes to fixer-upper properties.
The reason for that is because you can negotiate a fantastic price. The size and cost of renovation needed is a great negotiation tool. Moreover, if the government decreed a renovation, properties in the district cost more.
So you buy it at un-renovated prices and in a few months the prices hike insanely! These are the best deals.
Off-market doesn’t only stand for properties needing renovation, though!
Any property that hasn’t been listed on the market is off-market. So why are such properties worth seeking if they don’t need renovation?
Do you understand the auction mentality? In an auction, so many people want the item on auction and compete until it gets sold for an obscene price. This is what happens on a less extreme scale when a property is listed on the market.
People start viewing it, making offers, etc. and owners get greedy. They end up pitting the buyers against each other in a bidding race to get the most out of their property. That makes off-market properties easier to negotiate.
The owner can know the average going rate in their area. However, if they have no concrete offers the chances of you negotiating a good price are higher. Plus, you get to play on the instant gratification social programming aspect.
Sell today at this price or wait and maybe never get that price again once the property is listed and burned. A burned property is a property that has been on the market for so long. If it’s on market for too long, new buyers begin to suspect something is wrong with it.
So how do you find off-market properties?
One word… NETWORKING! It won’t be as easy when you first start. As you flip a few properties you begin to garner trust and more hunters trust you with their properties.
As you can imagine since these properties are so valuable, a great deal of secrecy is involved. If more agents and brokers know, by default it becomes an on-market property.
Build close relationships with independent agents. Become part of their inner circle. That way you increase your chances of being informed once they stumble upon such properties.
The other option is slightly harder. You could take a more proactive approach and begin seeking such properties yourself. Get creative, walk around neighborhoods asking the barbers, gate guards, bartenders, etc.
Approach people who would know of selling intent amongst the people they serve!
4. How To Make Money From Real Estate Investment Through Brokering?
What if you don’t have money to invest, renovate, or furnish an apartment? Don’t worry, you can still break into the real estate investment market!
But how you may be wondering. Well, my friend every real estate deal has a buyer and a seller, right? If you connect the two how much would it cost you?
This is brokering in most layman terms. It would require some work on your behalf. You would need to find a buyer and a seller and make sure the deal gets sealed!
There are a few ways you as a broker can make money. It all depends on your deal with the property owner. If you find a property owner who is in distress you can agree with them on a price they are content with.
The trick here is to agree on a price that you know you can sell for more. Then you agree with the owner in writing that anything above that is your compensation.
Another way to make money from brokering real estate deals is through a finders fee.
That fee is usually a percentage of the price of the property and gets paid by both the seller and buyer. If you find both the seller and the buyer the whole commission is yours. While if one or the other came via another broker, each of you gets their cut from their side.
You can also broker rental contracts and get a commission from both the landlord and tenant.
So this one is right out of the used car market’s playbook.
I’ll be honest with you, before researching and writing this article I had no idea this model existed. At least not in the real estate investing market, I’ve seen it in used cars.
So what is an “escrow”? The oxford languages dictionary defines it as:
So what conclusion do we draw up from this definition?
Someone wants to sell their house, and someone wants to buy. The buyer’s money is ready but it’s a Friday night. That means at least 2 days of the weekend are ahead of us before the ownership can be transferred.
The buyer wants to secure the property in their name. You know to avoid losing it to a higher bidder over the weekend. So what do they do? Escrow is the solution.
A legally binding preliminary contract is drawn up. The Escrow office holds the money and releases it once they see the title deed with the new owner on it. This service is offered for a fee.
Depending on where you live, starting such an office might well be an option for you.
6. Flipping Pre-Foreclosure & Foreclosure Properties
Foreclosure takes place when someone defaults on their mortgage payments. After a few missed payments and before foreclosure you could snatch them for great rates.
The owner is usually distressed and needs the money to avoid going into a lengthy process with the bank. You’ll find in many cases the owner is willing to sell for less than they paid. To be able to buy these under your name would require a good credit score though.
On the other hand, if that option isn’t available you could broker the deal. This time around you would charge the buyer a bigger fee since you are getting them a hot deal. However, in many cases charging the seller is not a valid option.
The other option is properties that have already gone into foreclosure. This time around, you’d be dealing with the bank as the seller. Negotiation on these properties is limited due to the bank regulations and policies.
So how would you get access to either of these? This is not as easy as some of the other techniques. The first option, I am not even sure, it’s 100% kosher. I wouldn’t do it, but I know many who use this strategy in multiple industries.
This approach involves more networking, this time with someone inside the bank itself.
Like off-market properties, they would let you know once such properties turn up. You would then approach the defaulting owner and offer to buy/market their property.
Disclaimer: This blog serves an international audience. Please ensure this approach is legal in your country before trying it.
The second approach is the one my moral compass prefers. Again networking, and yet again with agents. Ones who deal in these kinds of properties. If you offer them a share in your cut, they’ll be more willing to let you get involved in the deal.
The third, and least effective, approach for beginners is keeping your ear to the ground. Keep an eye out and take a proactive approach to find these. It’s not easy, but finding information is not impossible.
You will inevitably come across someone asking a question. Or posting on a forum or social media that they are close to losing their home. Sometimes a friend of a friend is in that situation, and you can jump on that. However, as stated earlier this is the most difficult and least effective way to do it!
Note: If you are a social person who makes friends easily, try the second approach for sure. With a little tact and social intelligence, it shouldn’t be too hard!
These properties can be flipped immediately for a profit. You’ll want to get involved in these as often as possible.
7. How To Make Money With Real Estate Investment And Commercial Properties
Commercial properties are a fantastic investment option. So far we have spoken about homes, but these properties are the honey pot of real estate investing.
Investing in and brokering sales in this niche is a very lucrative opportunity.
Why are they so attractive? Well for starters, they usually get rented out for higher than homes. Secondly, a good office or store/shop in a high traffic area can go for an obscene amount in most countries.
Whether you invest in one or broker the deal the opportunity to make money here is great!
If you can afford it, break an office up and use it as a managed workspace. Just offer a conference room, work stations, landlines, and a shared assistant/secretary. You’re all set!
You don’t even need to own the office, you can rent it out as we suggested in the second option. Moreover, if you are savvy, you could strike up a revenue-share partnership with the owner. With this arrangement, you don’t pay rent, you share some of your revenue with the owner on top of rental value.
8. Wrapping It Up With Some Tips and Tricks To Make More Money With Real Estate Investment
To boost your sales take your business online. Not the traditional way though! To stand out you need to be different…
Here are some ideas to help you do just that!
Create a blog about real estate investing. It’s not hard, just research your city and write up valid articles about the industry there.
Make sure you optimize your posts with the tips in this SEO article. This will bring you an endless stream of buyers and sellers.
Related Article: How To Rank With Keywords
Another idea is creating a real estate investing app. As impractical as it sounds it’s easier than you can imagine. Most of us have contacts in our social circles.
Someone you know is bound to know a developer willing to partner up with you on this. They take care of the coding and you conduct the day-to-day business side of things.
Otherwise, there are many mobile app builder tools online for a reasonable subscription. I am talking about the drag-and-drop sites, not the coding options. Then just use the free videos on YouTube to teach you how to do the things you need to do!
So there you have it! How to make money from real estate investment even if you don’t have money.
Just remember to do the tips in this section in addition to what others traditionally do, not instead of! Like, get on real estate marketing websites like loopnet.com or one that serves your city/country.