How To Make Money By Investing In Real Estate

Real estate is one of the first investments I’ve ever made.

It’s a great way to start investing because it never goes out of style. As long as there’s people in the world, there will be a need for real estate.

I remember being so consumed with information when I first started researching and still had no idea where to start.

Today I’m going to take you into some of my favorite ways to invest in real estate.

House Hacking

This is the simplest form of real estate investing that you can likely start today.

You’re either looking for a new property that you can rent out a spare room or the garage etc that can help you offset the mortgage or you can use your current property now.

It could be a duplex that you’ll live in one side and rent out the other (free mortgage for you!)

You can also do this with something larger, like a 4-plex.

This type of investment is desirable because you’re able to take advantage of a lower down payment if you’re in the buying phase and you’d be living in the property yourself.

If it’s your first house you can use a FHA (Federal Housing Administration) loan for a whopping 3.5% down!

House hacking can also be as simple as putting your spare bedroom up on Airbnb or for rent and create a profit that way.

Rental Property

Rental properties can be a great source of passive income.

This is when you purchase real estate and either rent it out on a yearly/monthly basis or make it into a vacation rental or AirBnb.

Pros

• Can provide passive income for years to come.

• While the property is rented someone else is paying down the mortgage, giving you more equity in your home.

Cons

• You are responsible if anything breaks or needs fixed and housing issues can be expensive.

• If the property is vacant you’re still responsible for paying the mortgage and ensuring that the property is kept up and running.

• You could end up with a tenant that’s horrible and ruins your property, or doesn’t pay.

House Flipping

This is considered more of a high risk investment.

This is an option for those of you who have skills in remodeling, or have a team of people who do.

There’s a lot of money to be made in flipping a house! But on the other side – you can definitely lose a lot of money as well.

The idea behind house flipping is to buy a distressed property for a low dollar amount and fix it up to resell it for a profit.

Let’s discuss the pros and cons to this type of investment strategy.

Pros:

• You can make a large profit to roll into your next project.

• There could be a quick turn around time depending on what needs done in the house.

Cons:

• Usually you’re using cash to buy the property & cash or credit to fix it up.

• The house could sit on the market for a long period of time, upping your costs.

• There could be more wrong than you planned and you could end up spending a lot more money than you budgeted for.

• Your returns are considered as Capital Gains and you will be taxed as such. To avoid this you’d roll your profits into the next project.

Additional Options

You could always rehab the house and if it doesn’t sell right away you’re able to rent it out.

Obviously if you’re in it for the fast gains this option wouldn’t be appealing to you, but it is an option.

This is actually considered another form of real estate investing…

BRRRR Strategy

This is a good way to build equity, passive income, and create a portfolio.

BRRRR says stands for Buy, Rehab, Rent, Refinance, Repeat.

You’d buy a distressed or outdated property with a loan using 20-25% as the down payment or avoid the loan all together and use cash.

You’d then add value to the property through rehabbing it and create a cash flow by renting it out.

Once you do this you will Refinance the property into a better financial position and do the whole thing over again.

A great source of information regarding this strategy is located here on BiggerPockets

REITs

Another option is to invest in Real Estate Investment Trusts or REITs.

REITs are companies that own, operate, or finance income-producing real estate.

They allow anyone to invest in portfolios of real estate assets through the purchase of an individual company stock or through a mutual fund or exchange traded fund (ETF)

The stockholders earn a share of the income produced through the real estate investment without actually having to be hands-on.

The average return is about 10%.

You’re able to invest in REITs by purchasing shares through a broker like Webull or Vanguard.

As you can see there’s a ton of ways to get invested in real estate. Depending on how much time you have or how hands on/off you’d like to be, there is something for you.

Make sure to do your research and don’t get stuck in the “analysis paralysis” phase.

The key is to just get started. The only regret I’ve had is not getting started sooner. If you’d like to check out how I got my first house before I turned 21 check it out here.

What makes you want to invest in real estate?