Ways to Make Money by Investing in Real Estate
October 17, 2018
There are three primary ways you can make money through real estate investments. They include through rent, appreciation, and loans. We will cover these in this article, so continue reading.
- Rent: if you hold equity ownership in a property, you can lease the property to earn income. This is a great way to generate a regular stream of income. You can choose to manage your own properties independently to keep all your earnings, or hire a manager and pay them to manage the properties depending on your preferences.
- Appreciation: when you own real estate, you, as an investor, can earn money when that equity is sold. The appreciation of the property is the value of that property that is increased over time potentially if that property is sold. Unlike renting, when an investor sells a property, they are given a large, single return. When the investor makes the sale, they can have an active or passive investment. That is dependent on the investment’s position.
- Loans: an investor can make money through interest on their loan, or their debt. The investor loans money to a real estate developer then earns money as the developer pays interest on that loan. That provides a regular stream of income for the investor. This is a great passive investment for a real estate investor to consider.
Each of the above categories of investment carries their own rewards and risks. No matter which type of real estate you decide to invest in, you should only invest wisely once you have run the opportunities through a thorough underwriting process. Doing so plays a vital role in deciding whether the opportunity to invest is sound and if it can meet your investment goals.
Many real estate investors will analyze real estate using a projected rate of return. Those who are more seasoned, though, tend to look at the capitalization rate to assess any potential opportunities.