During the housing boom of the mid 2000s, real estate investing was at a fever pitch.
Flipping homes was not too difficult, because by the time you were done with construction the market had gone up another 10%.
I was in high school, so had no money and no access to capital. But I caught on to another trend of the booming real estate market: home flipping shows.
The real estate market eventually crashed, but the home flipping shows took off on a multiple decade run.
This was when I seriously caught the real estate bug (along with many others), watching “Flip This House” and “Property Brothers”.
After college and a brief stint in healthcare, real estate became my full time career at age 25.
Since then, I have helped hundreds of clients buy and sell homes and invest in property.
I have also owned or had a stake in both buy and hold rental properties, renovations, new construction and home flips. Here is the story of my first two properties I purchased.
Let me tell you, it is not as easy as TV made it seem. Making money in real estate is a marathon, not a sprint.
If you are committed to the process, you can do very well. Many millionaires and a handful of billionaires have been created through real estate.
Here are 7 popular, tried and true methods to start making profits in the business of real estate.
1. Sell as a Real Estate Agent
Becoming an agent and getting paid to help others buy and sell real estate is a great way to get started if you do not have the capital to invest.
Now, just like the rest on the list, this is not an easy and quick way to get rich.
There is a lot of competition in the major markets and you have to become an expert and bring your clients true value to really last in the business.
But if you are tenacious, committed to doing the right thing and ready to work hard you will be rewarded.
Many companies have done some good market research showing the high earning potential for real estate agents.
It is also common for real estate agents to make a jump from selling real estate to investing in it. This was my path, and I both help clients and invest my cash into real estate deals.
Are you just getting into real estate? Read my guide on your first your as an agent.
2. Buy & Hold
Buy a home, rent it out, build equity and hold onto it.
Ok, so there is more involved than that. Buying rental properties is my favorite method of building wealth.
There are multiple advantages to renting out properties. Rental income, chance to add value with renovations, appreciation over time and more.
There may also be tax write offs, check with an accountant to see what strategy is currently being used.
Many investors use the BRRRR method, (Buy, Rehab, Rent, Refinance, Repeat).
The 4th “R” brings about another important advantage: you can refinance and get some cash out of a rental property to buy others.
So you do not always need to sell the home to realize the equity you have gained by renovating, or by making mortgage payments.
3. Home Flipping
Home flipping is trendy in hot real estate markets when the economy is good.
This involves buying homes that need updating (sometimes significant work), renovating and then selling it soon after for a profit.
There are many professional real estate flippers in any given market and the potential to make money this way is well proven.
The money is made by finding a seller that will offer you a discount on the sales price in exchange for other favorable contract terms.
Sometimes a fast sale with no contingencies is crucial for a seller. Other sellers do not want to deal with any repairs and may even want you to clear out the house.
Having a good team of contractors at the ready is also a crucial element of flipping real estate. Time is money, and well, money is money. The right contractors can help you save both.
Starting with a small project can be a really good idea, unless you have a partner who has experience.
This is a completely passive method of real estate investing.
I have never owned any shares of an REIT ( Real Estate Investment Trusts, pronounced “reet”). I include them here because they are a good way to get involved if you want do not want to invest a lot of time.
An REIT is a company that pools together the money of lots of investors and then the management of the company decides how to invest the funds in real estate.
REITs invest in a wide variety of real estate. Million acres has a great guide on REITs.
Real estate wholesalers make money by flipping a contract on a property rather than the physical property.
“Contract assignment” refers to when a buyer gets a contract with a seller, and then finds another buyer to take their place as the buyer.
The new buyer will pay an “assignment fee”.
Usually, wholesalers will advertise the deal at a certain price, and the fee will be the difference between the original price with the seller and the agreed upon price with the new buyer.
Wholesalers can make a good living.
However, there have been some questions around the ethics of wholesaling because you are not physically doing anything to the property and just being the “middleman” to another investor. Sometimes for a huge profit.
There are many arguments for and against it, this thread on reddit has some good discussion about it.
6. Building Homes or Partnerships With Home Builders
Of all the options, this is the most intensive, requires the most expertise and also likely the highest financial risk.
However, many of real estate top dogs are developers or are involved in building homes and other properties.
Projects could vary from one single family home on one single lot, a community of hundreds of homes, or multiple highrises of thousands of condo units.
To build new homes you will have to start with finding land. After/during that process you will design your home(s). Then once you close on the land you obtain permits and build.
The reward is high, but the cost of obtaining the land and building the homes means a large upfront investment.
It also takes time. Flipping an existing home can take a matter of months. Building homes can take a year or many years depending on the project.
For more information about new construction homes see my guide here.
There is also something called a joint venture with an existing builder that can give good return, without having to actually do the construction.
Usually you will be helping obtaining financing, providing down payment, or both.
Every joint venture setup is different, but most of the time the profit is split at the end.
Not all builders will entertain a joint venture. And many want a pre-existing relationship with their investors.
The more value you can add to a builder (money, expertise, access to a buildable lot, etc) the more likely they will want to partner.
7. Start A Company Involved With Homes
Real estate is a big portion of the economy. You can make money investing in real estate, but you can also make money providing other services.
Getting a contractor license to do work on homes both for investors and homeowners can be a great way to get started in real estate, especially if you have experience in a trade.
The possibilities here are near endless: home inspectors, appraisers, landscapers, mortgage lenders, hard money lenders are all great examples of professions that can get you making money.
8. Vacation Rentals
The rise of sites like VRBO and AirBnb have made it easier than ever to find short term renters for a well placed home.
We have spoken with many investors who have gotten incredible returns on luxury vacation rentals, and members of our group even own some.
Of course, this is only for those who are willing to take on a high risk, high reward investment. Short term rentals tend to be the first to go down during a recession, and the upfront cost can be high.
But the reward from a successful vacation rental can also be high.
Many professional investors are also building new homes in secluded areas or an area near lots of natural beauty/amenities to rent out.
This technique is called “build-to-rent” and has become more popular as vacation rentals have taken off.
Build-to-rent homes can also be done for more traditional rentals as well. For more information, check out this article Will was featured in: Build-To-Rent Homes: What You Need to Know About the Future of Single-Family Rentals.
Want to be successful in real estate? This list is not all inclusive, but many who have found financial freedom and real wealth have incorporated these tactics.
Eventually, most people focus heavily on 2-3 of these methods, for example building homes, flipping homes and buy & hold investing.
If you have any questions, reach out to me!
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