Real estate can be an excellent investment because it can not only generate a consistent monthly income for you, but also appreciate in terms of asset value over time and enable you to build long-term wealth. In this post, we will take a look at five tried and tested ways to make money from real estate.
If you are looking for consistent income, you can buy a residential property and rent it out. Commonly referred to as the buy-and-hold strategy, it can help you earn passive income on a monthly basis. You should do your due diligence or work with a real estate agent if needed to find the right property at the right price and in the right location.
Depending on your preference, you can buy an old, run-down property at a cheap price, fix it up, and rent it out or buy a turnkey property and rent it out right away.
Real estate investment trusts – commonly referred to as REITs – are an excellent way to invest in real estate and earn income consistently. Here is how it works.
REITs collect funds from individual investors and invest in income-producing residential as well as commercial properties across the country. Each investor is paid a portion of the total rental income generated by these properties. Under SEC rules, it’s mandatory for REITs to pay out 90% of the profits they make, which means you can expect to receive solid returns on your investment in the long term.
Depending on your preference, you can choose to invest in REITs that directly invest in physical real estate or in REITs that invest in mortgage debts.
Real estate crowdfunding
Real estate crowdfunding is by far the easiest way to invest in real estate. Crowdfunding platforms connect real estate developers with people who are looking to invest in real estate. Developers can list their projects on the platform and get the funds they need from individual investors. Once the project is completed, investors can get a share of the rental income or a share of the proceeds.
Renting out a spare room
If you have a spare room in your home, you can rent it out and make some money on the side. You can get your place listed on Airbnb and other such sites so that interested parties can approach you directly. It’s fairly easy to do and requires little to no investment on your part. Millions of homeowners around the world are earning a decent income by renting extra space through Airbnb.
House hacking is basically an extension of the Airbnb strategy mentioned above. You can buy a multi-family property, live in one unit, rent out the remaining units, and use the rental income to pay your mortgage.
Managing a multi-family property and dealing with the tenants can be a difficult task, so you probably might have to hire a property manager to take care of it for you and pay them a portion of the rental income. It’s why you need to invest in a property that can generate a sufficiently large rental income that can cover your mortgage as well as property management expenses.