Real estate is arguably the most profitable than any other industry. Yet, many people are still sceptical about it. But if you know what you’re doing, it can seriously earn you a living.
According to research, 90 percent of the world’s millionaires got their wealth, and maintained it, through real estate investing. And it’s still one of the lucrative investments that’s effective today. It has so many benefits to offer. The best part of it is that you can even start without significant capital, major assets, or credit.
Convinced? If you are, here are some strategies on how you can make money in this industry.
Buy to Let
One of the most common strategies that you can use is “buy to let.” Also known as BTL, this refers to purchasing a property in order to rent it out to tenants – either for residential or commercial use.
Usually, landlords choose to purchase a property, then lease it for residential use. The good thing about this is that it performs better even in the middle of an economic crisis. When the pandemic started, a lot of businesses were affected and closed down. This kind of scenario affects commercial investors too.
But residential real estates are immune to this as it’s always in demand. Thus, even if there’s an economic crisis, you’re still sure that you can earn money from your investment.
However, over time, you are at risk of spending more money. Renting a house out for residential use has phantom costs or unseen expenses. This includes repairs and maintenance.
If there’s a leak, you’re liable to fix it for your renters. You’re also the one who’ll spend on renovations for the next tenant, you’ll pay for the electrician, repairman, etc.
On the other hand, there is commercial real estate. For this strategy, you can lease your property for commercial use. This can give you more income. In fact, it can generate 6 to 12 percent of return of investment price (yearly) than residential real estate, which can only make between 1 and 4 percent.
In addition to that, you’re ensured that your property is well-taken care of. This is because retail tenants need to maintain their store and storefront based on the rules and regulations of the company. Their business will be affected if they don’t follow them.
As a result, their interests are aligned with yours. This will definitely help you maintain and improve your property’s quality, as well as the value of your investment.
In addition to that, you won’t have to worry about renovating it. Some companies usually want to handle the renovations on their own as they have a design or branding to follow.
Renovating property is also one of the common strategies that investors go for. Here, investors purchase a property, usually residential, renovate, then sell it.
For this strategy, you’d purchase a property at a low price. Experts on real estate investing say that the cheaper you can buy it, the more likely you’ll profit from it. However, this also means you’ll need more work and money to refurbish it.
But the good thing is that remodelling a house can increase its resale value more. Windows and garage door replacements alone can increase the property’s value up to 75 percent.
But for this strategy to be viable, you’ll need a huge amount of money. It looks easy but the process is lengthy. Still, the amount of money that you’ll gain is worth waiting for.
Thanks to the advancements in our technology, you can now invest in real estate online. This strategy involves web platforms and mobile applications. These platforms and apps will connect you to real estate managers who are looking to invest in properties. Once you get a deal, they will trade your capital with dividends provided that they earn money.
Real Estate Investment Trusts
This investment strategy is a bit different. Also known as REIT, this kind of resembles the real estate funds. However, you neither purchase nor manage the property yourself. Rather, you and other investors will pool your money into a fund, but a company will manage it.
REIT comes in various forms. Some REITs mainly focus on retail properties, including shopping centres. Others focus on hospitality, namely hotels and motels. The good thing about it is that you have a wider option.
Another good thing about it is that you don’t need a huge chunk of money in buying properties. Plus, it has lower risks than other strategies.
All of the real estate investment strategies actually come with risks. For instance, commercial real estate doesn’t perform well in economic crises. Renovating properties takes time, effort, and money, which can be a drawback too.
No matter where you invest, there are always downsides, especially if you’re only putting all your eggs in one basket. But if you diversify your investment, there’s a smaller chance that you will lose all your money.
For instance, if you were to spend all your money in one building and renovating it, but no one buys or rents it, you’d likely find yourself in trouble. All of your money was already spent in that one building and you have no money coming in.
You can lessen such risk by putting some of your eggs in other baskets. This means you can buy a few houses or venture into other real estate investment strategies. This way, you won’t have to worry about your income. Even if the market crashes, you still have a backup.
It would be even better if you invest in different sectors in different countries. Thus, if the prices plummet in one country, your losses are reduced as your investments are balanced by the good ones.
Investing is not as easy as it looks. It involves more money than you thought, depending on the real estate strategy you’re going for. Plus, there are risks. But it’s a lucrative investment. If you know what you’re doing, you’ll surely earn more.