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The truth is, everybody needs a place to live. There will always be demand for properties and homes. Therefore, real estate can be an excellent money-making machine if you know how to invest in it correctly and produce an income for yourself.
Most people think that earning in real estate only comes after purchasing a house. Some also believe that you need considerable capital to start this endeavor. However, that’s not always the case. There are different methods to implement when the budget is not a premium or owning a home isn’t an option.
Without further ado, check out the four ways to earn from real estate aside from buying a property.
1. Real Estate Crowdfunding
If investing a large sum is too risky or daunting for you, real estate crowdfunding can be a good option.
From the name itself, crowdfunding basically means gathering funds for a project from a large number of people. Online sites and platforms help real estate developers to look for real estate investors to finance them. Having said that, you will be joining other investors for a more extensive residential or commercial deal where investments are made online.
However, like any other form of investment, there’s always a risk to this idea. Here are the pros and cons of crowdfunding:
- You will have the option to invest in single projects or a group of projects.
- Global diversification exposes you to more opportunities for return.
- Some projects resort to crowdfunding sites due to the non-availability of traditional financers.
- Some projects demand the investment to be locked up for several years, which makes it illiquid.
Though money doesn’t buy happiness, it can sure help you get your real estate business off the ground. The following options are ideal for those who don’t want to own a property but still want to make money.
a. Contract Flipping
Contract flipping is an excellent way to start your journey if you want to get started in the real estate industry with a minimal amount of capital at hand.
On the contrary, this will require your hard work. One major thing to do is look for distressed home sellers, probably those behind their mortgages. Get it under a contract and sell the contract to an interested buyer for a higher price. Thus, allowing you to earn a profit without shelling it an enormous amount of money.
b. House Flipping
House flipping is basically buying a house, rehabbing and repairing it, and then selling it for a higher value to earn a profit. Therefore, this might need your real estate valuation, renovation, and marketing expertise. Not just that, this would also require you a significant amount of capital to purchase a house and allot a budget for the renovation. On the other side, when you have successfully flipped the property you’ve invested in, this can offer quick returns. Thus, the investment is tying up your capital for a shorter period of time.
Property leasing can be a good source of passive income when you know how to do it properly. You can do this in two ways:
a. Vacation Rental
High-traffic tourist areas are ideal for this option as these areas have high demands for short-term rentals. You can rent out a space for tourists daily through different online platforms like Airbnb, Booking.com, etc. Because most people recognize these booking sites, you already have an audience — saving you traditional marketing costs. Another positive note about a vacation rental is that this is usually a go-to option for tourists who want to feel at home in their accommodation and be able to cook and welcome visitors.
b. Long Term Residential Rental
On the other hand, you can also do long-term rentals and offer a six-month up to three-year lease. This option is great for residential areas where you can market to young families, students, and those on long-term business trips.
Not owning a property is never an issue for these options. You can always leverage a family, friend, or neighbor’s property. Offer them a deal that allows you to rent out and manage their real estate and share the rental income. However, you need to consider the possible expenses to arise, such as repairs for the damages made by the tenants and clean-up and maintenance services. Consider these overhead costs when deciding on your rental rates.
4. Real Estate Investment Trust (REITs)
Real Estate Investment Trust, commonly known as REIT, is a company or a trust that mostly operates income-generating real estate like apartment buildings, shopping centers, hotels, and condominiums. These companies allow individuals to finance or invest in their property through stocks. Mainly, these companies generate an income through leasing spaces in their real estate assets and accumulating rental payments from tenants. From the generated revenue, they will pay out dividends to the company shareholders.
With the right tools and know-how, you too can start your own real estate business. As you’ve read in this article, you don’t need large sums to get that off the ground. Earning income through real estate is doable.
The need for capital might arise in some cases, but the options given in this article don’t require you to buy real estate to start up a money-making machine.
You can always try crowdfunding if you have a limited amount of capital. Leveraging existing relationships and renting out their on-hand real estate is a go-to option for those who don’t have the financial capacity. On the other hand, if finances are available but owning a property isn’t an option, you can always opt to flip houses and even contracts. Lastly, real estate investment trusts can also be an excellent idea for those that want to profit without doing much work.
To sum things up, money can help you jumpstart a real estate portfolio, but you always have the option to generate an income without having much of it. Considering the four options stated above will surely help you start up and flourish in the real estate industry.
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