Making Money In Real Estate – 9 Basic Ways

Making money in real estate is an endless topic that includes all the various types of real estate investments. There are land, apartment buildings, homes, commercial buildings and more. Whatever the type, however, you’ll make your profits in some of the basic ways listed below. Use this list to get yourself thinking of the possibilities.

Appreciation

Making money in real estate can be as simple as holding on and waiting. To really get the most appreciation in value, however, you should buy in an area where demand is growing faster than the supply.

Depreciation

Remember that after all the tax law changes, you still get to declare a loss for the depreciation that doesn’t really exist. That can save you a lot at tax time, meaning more after-tax profit. To maximize this, buy a property that has its value primarily in the buildings, because you can’t depreciate the value of the land.

Loan pay-down

You gain equity with every payment you make. Get the lowest interest rate you can and more of each payment will go towards the principal.

Cash flow

When you buy income property the right way, you not only have your tenants paying all the costs and paying down the mortgage loan, but you also have positive cash flow.

Buy low

When you buy the below-market you get instant equity that will be converted into a profit when you sell. Offer a reason for the seller to sell low: fast closing, cash, assume some debts or liabilities, etc. Or just make a low offer. The seller may have his own reasons to sell it cheap.

Sell high

Clean it up nice, make it easy to buy, and find the right buyer to get top peso. The next four on the list cover ways to create value, so you’ll get more when you sell.

Offer to finance

You can often get substantially more for a property if you offer to finance. This is especially true if you let someone buy it with little money down. You can also get a good interest on the loan.

Change use

If there is a higher use for the property, you can convert it to make it worth more to the next owner. Sometimes this means making condos into apartments, or apartments into condos. Maybe converting a home into office space will get the biggest return, some are even converting it to a restaurant or something.

Improve and repair

Repairing anything that needs it is obvious, but you need to look creatively and carefully to find improvements to make. Concentrate only on those that will raise the value several times more than what they cost you.

Making money in real estate can be a wonderfully creative process. Just look at the sources of profits listed here, and think of how you can use a few of them on your next real estate investment.