Top 3 ways real estate investors make money
There are three main ways to make money investing in real estate. Real estate investors make money when; their property increases in value, when they earn rental income and lastly when they generate profits from real estate related business activities. Below is an in-depth discussion on each of these ways.
1. Making money from increases in property value
This is one of the main avenues of making money as a real estate investor. Although property value doesn’t always appreciate, real estate investors who invest in the long-term always make money since property value tends to go up in the long run more often than not.
2.Making money from rental property
This is undoubtedly the most popular and simplest ways to make money with real estate. If you own a house, apartment, office building, hotel or any other rentable property, you can make money by charging rent. Rental income is simply a compensation for allowing people to use your property.
You can use simple financial ratios like the cap rate (capitalization rate) to maximize your earnings from your rental property. For instance, if your real estate property earns you $100,000 every year and it sells for $1 million, the cap rate of that property is 10%. This simply means you earn 10% of your investment every year if your investment is cash based i.e. no debt.
3. Making money from real estate related business operations
You don’t have to be directly involved in real estate investments to make money. You can choose to earn money in many other ways aside from brick and mortar investments. For instance, if you own a hotel, you can sell on-demand movies, internet services etc. to your guests. If you have an office block, you can choose to put up vending machines, charge parking fees etc.
In a nutshell, the opportunities for earning money in real estate related business operations are limitless. You just need to open your eyes and explore your options. You also need to be open-minded.