6 Effective Strategies to Generate Money from Real EstateDec 19, 2023
Believe it or not, you don’t need a tremendous amount of capital to generate money from real estate deals. Many first-time investors believe they need thousands in savings to begin their real estate journey. But the beginnings of your real estate investment journey are much simpler steps to take.
Knowledge is your most valuable asset as a real estate investor. Study the trends, look for localized markets with promising opportunities, and create a blueprint for your real estate business. Determine what types of properties — single family, semi-detached, multifamily, commercial office space — will encompass the prime holdings in your real estate empire.
Once you have that knowledge mapped out, all you need from there is a winning investor mindset to begin your journey. Believe in the power of positive energy and have confidence in your preliminary market research. If you’ve analyzed the market, and created a rudimentary growth plan, you have everything you need to generate money from real estate.
What you don’t need to generate money from real estate
Before diving into practical tips on how to generate money from real estate, let’s first dispel a few myths. Your greatest roadblock as a budding real estate investor is self-doubt. Believe in your ability to grow your business, and you’ll find the drive to keep moving forward.
Part of what feeds those doubting thoughts are misconceptions about what it takes to start a real estate investment business. These are three of the biggest myths that hold people back from achieving their dreams as real estate investors.
You don’t need a strong credit score
There’s never a perfect time to undertake a transformative journey. Don’t allow poor, or zero credit, hold you back from achieving your dreams. Some of the most practical real estate investment strategies require little to no credit, so don’t allow those doubts to hold you back.
You don’t need significant capital savings
This may seem like the most contradictory misconception on the list, but it’s true. You don’t need to have significant capital savings set aside to begin your investment journey.
All you need so you can start to generate money from real estate investments is a few hundred dollars to open a property tax account. A property tax account is the Canadian version of escrow, which allows funds for real estate deals to be held and transferred by a third party. The credit of this third party source allows the transaction to complete.
You don’t need to put up your own assets to complete deals
The final misconception is that you need to use your personal assets as collateral to negotiate deals on investment properties. Instead, you can use creative financing to negotiate terms on loans, mortgages, and other financial capital to build your business.
Pooling your investments together with other investors, enabling you to use other people’s money (OPM), is an excellent form of creative financing. Access to OPM is one of many reasons why joining a thriving real estate investment community is an excellent way to accelerate your means to generate money from real estate deals.
6 strategies to generate money from real estate
Now that we’ve dispelled common misconceptions about how to begin your journey as a real estate investor, let’s dive into the best strategies to generate money from real estate. Here are eight of the most promising methods to earn the biggest bang for your buck.
Focus on long-term multifamily residential rentals
At WealthGenius, we encourage every investor in our real estate community to concentrate their efforts on multifamily property investments. Unlike single family or semi-detached properties, multifamily buildings include dozens, or in some cases hundreds of tenants.
As a result, multifamily property investments carry less risk for investors and generate more steady streams of inbound cash flow. If one tenant falls behind on rent, or chooses to vacate their unit before a replacement tenant is found, it won’t disrupt your profit margins. Simply put, multifamily investing is a more stable, more secure, and more sustainable investment strategy.
Negotiate lease options when market conditions make sense
Remember how we said that you don’t need strong credit or significant capital to begin your investment journey? Lease options are one prudent way to generate money from real estate without a cushion of capital in your bank account.
A lease option is exactly as it sounds: you’re leasing with an option to buy. Similar to how you can lease a new car, you can negotiate a pre-set price to lease a property with the option to purchase the building at a later date.
The caveat with this approach is that housing market conditions will dictate its effectiveness. If the market is in bullish territory with prices expected to rise, the pre-set price is a discount below the property’s eventual market value. This means you’ll buy the property at a lower price and you can flip it at a higher asking price to make a significant return on your investment. However, if the market heads into bear territory, prepare to take a loss on this approach.
Look for properties that you can flip for higher returns
If you’re just starting your journey, here’s a useful tip that can put you ahead of many investors beginning their own journeys. Look for properties that you can flip at higher returns than your purchase price to make a substantial profit.
The best way to implement this strategy is to find buildings for sale that are classified as fixer-uppers. But don’t just buy the first building you see in need of some fundamental touch-ups. Search for neighbourhoods with above-market property values and find the building in greatest need of repairs.
In all likelihood, you can buy the building at a below-market value, especially in such an affluent neighbourhood. Invest in the repairs and stabilize the property so that you can have it re-assessed at a higher value. Once you have the assessment, you can put it back on the market and make a massive return on your initial investment.
Serve as a bridge between desperate sellers and eager buyers
Another lesser known way to generate money from real estate is through contract flipping. In a nutshell, contract flipping is when you insert yourself into a real estate deal between a property owner motivated to sell and another investor who is eager to buy.
By identifying current property owners who want to part ways with their building, you can negotiate better terms that will cost you less money. Additionally, by partnering with another eager buyer, they can carry the closing costs in their own property tax account. Also, use this strategy as another method of using OPM to close lucrative deals.
Target properties in foreclosure or that are on the verge of it
When current property owners are behind on mortgage payments, or have accrued too much outstanding debt, they will likely be forced to place their investment property into foreclosure. While this is a difficult situation for the current owners, the conditions present a viable investment opportunity for your budding real estate business.
You can use the situation to negotiate very short sales cycles and below-market prices for these properties. Assess the building as you enter negotiations and determine how many, if any, repairs will need to be completed to improve the building’s value. If you calculate that the investment is feasible and potentially profitable, take the opportunity and close a great deal.
Don’t forget about vacation rental properties
Suppose you’re investing in a popular vacation destination, such as Whistler in British Columbia. Over three million overnight and non-overnight visitors travel to Whistler every year (approximately 45% in the winter and 55% in the summer). It’s a prime destination for mountain biking and an appreciation for nature during the summer, as well as one of the most popular skiing/snowboarding resorts in the winter.
Continuing with Whistler as the example, look for any listed properties that are up for lease or sale in the community. Once you acquire the deed, add the property as a tourist rental destination on platforms like Airbnb. There will always be rampant demand for vacation rentals, so seize the opportunity to generate money from real estate in a location like Whistler.
Learn more about how to generate money from real estate
Still unsure about how to build your real estate business? Are you eager to generate money from real estate but require supportive coaching to take the first steps of your journey?
Take the next proactive step by requesting an invitation to join the fastest growing real estate education community in the country. This is an exclusive community for people who share your passion for accelerating their real estate IQ and building thriving businesses that change the trajectory of their entire lives.
We’re always excited to meet new people who are ready to engage in a life-changing journey. Contact us today, and let’s help you build a lucrative real estate empire!
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