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When investing in real estate, the goal is to put money to work today and allow it to increase so that you have more money in the future. The profit, or “return,” you make on your real estate investments must be enough to cover the risk you take, taxes, utilities, and maintenance.
Here are four ways real estate investors make money :
Table of Contents
1. Real Estate Appreciation
It’s when the property increases in value due to a change in the real estate market. This value can depend on time, potential upgrades to the property, or if the area is slowly turning into a commercial space.
Real estate appreciation is a tricky game. It is riskier than investing for cash flow income.
2. Cash Flow Income
This type of real estate investment focuses on buying a real estate property, such as an apartment building, and operating it, so you collect a stream of cash from rent. Which is, the money a tenant pays you to use your property for a specific amount of time.
Cash flow income is generated from well-run storage units, car washes, apartment buildings, office buildings, rental houses, and more.
3. House Flipping
House Flipping is when an investor buys a property that has the potential to increase in value with the right updates and repairs. After completing the work, they make money from selling the home for a much higher price than what they purchased it for.
Another type of house flipping is when an investor buys a property in a market with rapidly rising home values. They make no updates, and after holding the property for a few months, they resell at a higher price and make a profit.
4. Ancillary Real Estate Investment Income
For some real estate investments, this can be a significant source of profit. Ancillary real estate investment income includes things like vending machines in office buildings or laundry facilities in low-rent apartments. In effect, they serve as mini-businesses within a more significant real estate investment, letting you make money from a semi-captive collection of customers.
Andrew Seymour
