2019 is a great time to learn how to make money in real estate. With real estate investing being the key to wealth for most of the richest people in the world, there are a host of strategies that are utilized for generating profits in this asset class.
If you’re just getting started or growing your knowledge of how to make money in real estate, the tips you learn here will be helpful in getting you zoned in on some of the hottest opportunities in real estate that are especially relevant in 2019.
For this blog, we checked in with other investors and leaders in the world of real estate investing to give you an idea of what others have to share regarding the best ways to make money in real estate right now.
In R.L. Adams article for Entrepreneur.com called, 8 Proven Ways to Make Money in Real Estate, he shared a top strategy for how to make money in real estate. He said…
1# Long-term residential rentals
One of the most common methods for making money in real estate is to leverage long-term buy-and-hold residential rentals. People will always need a place to live, and that means getting involved with rental properties. You need to do the proper amount of due diligence to source your property by keeping three principles in your mind: location, location, location.
Yes, you’ve heard it before, but location is everything when it comes to real estate. Not only does this apply for actually an increased asset value over time, but also in your ability to quickly rent that property to a long-term tenant.
When you’re considering long-term residential rentals, look for a great location. That’s more important than the current state of the property itself. In fact, run-down homes in great locations are one of the best investments you can make.
This involves a more traditional approach to making money in the real estate market. It means buying a property with some cash on hand to make a down payment and then holding that property for the long term.
Depending on your personal situation, you can easily grab that property for a very low or even no down payment. That’s especially true if this is a pre-existing, income-producing property.
If there’s positive cash flow in a residential rental, then it could be a great investment. However, you’ll likely not find that too easily, unless the current owner is unloading for personal reasons due to a divorce or other need to liquidate that property that necessitates having some cash on hand.
Alexa Mason shared some great insights in her article called 5 WAYS TO INVEST IN REAL ESTATE IN 2019 on collegeinvestor.com. One of the top ways she shared is as follows.
2: Real Estate Investment Trusts (REIT)
If you think real estate is a great investment but don’t want to get quite so hands on, you could take your real estate investing to the stock market.
Real Estate Investment Trusts (REIT) are great ways for you to invest in real estate without being actively involved. An REIT is a fund that is setup to invest in mortgage instruments, bonds, and stocks in the real estate niche.
There are a few different types of REITS; equity, mortgages, and hybrid. An equity REIT invests in properties, a mortgage REIT invests in mortgages, and a hybrid is the mixture of the two. All three typically offer high yields – basically you get paid back from the interest others are paying on their mortgages.
If you’re strapped for time, investing in REITs is probably the way to go.
Some of the more popular REITs include American Capital Agency (NASDAQ: AGNC), Annaly (NYSE: NLY), Realty Income (NYSE: O).
Up next, we have really good advice from Joshua Kennon, who shared some great money making investment tips on TheBalance.com, in his article titled, How to Make Money By Investing in Real Estate.
3# Increase In the Property Value of Your Real Estate Investments
First, it’s important you understand that property values do not always increase. This can become painfully evident during periods like the late 1980s and early 1990s, and the 2007-2009 real estate collapse. In fact, in many cases, property values rarely beat inflation. For example, if you own a $500,000 piece of real estate and inflation is 3%, your property might sell for $515,000 ($500,000 x 1.03%), but you aren’t any richer than you were last year.
That is, you can still buy the same amount of milk, bread, cheese, oil, gasoline, and other commodities (true, cheese may be down this year and gasoline up, but your standard of living would remain roughly the same).
The reason? The $15,000 gain wasn’t real. It was nominal.
This happens because the government has to create money when it spends more than it takes in through taxes. All else equal, over time, this results in each existing dollar losing value and becoming worth less than it was in the past.
One of the ways that the savviest real estate investors can make money in real estate is to take advantage of a situation that seems to crop up every few decades: When the rate of inflation is projected to exceed the current rate of long-term debt, you might find people willing to gamble by acquiring properties, borrowing money to finance the purchase, and then waiting for inflation to increase.
That way, they can pay off the mortgages with dollars that are worth far less. This represents a transfer from savers to debtors.
You saw a lot of real estate investors making money this way in the 1970s and early 1980s as inflation began to spiral out of control before Paul Volker took a 2×4 to its back and brought it under control by drastically raising interest rates.
The trick is to buy when cyclically adjusted cap rates are attractive or when you think there is a specific reason that a particular piece of real estate will someday be worth more than the present cap rate alone indicates it should be.
For example, talented real estate developers can look at the right project, at the right time, at the right price, and quite literally create the future rental income to support a valuation that might otherwise appear rich based on present conditions because they understand economics, market factors, and consumers.
In my old hometown, I watched a terrible old hotel on a great piece of land get transformed into a bustling shopping center with office buildings pumping out considerable rents for the owner.
Absent those cash flows, present or net present value; you are speculating to some degree or another, no matter what you tell yourself, no matter which banks approve your loans, and no matter what society around you says.
You will require either substantial inflation in the nominal currency (if you’re using debt to finance the purchase) to bail you out or some sort of low probability event to work out in your favor.
If you’re ready to take the next step towards making money in real estate, you should connect with the team here at Utz Property Management to learn more about how we can help you achieve your goals as a real estate investor.
Schedule your PROPERTY PROFITS STRATEGY SESSION today.
In This FREE 1 Hour Session, an expert real estate investment coach from our team will work personally with you to…
- Examine your current real estate investment portfolio/plans to see what’s working and what’s hurting. Discover where you’re making money and losing it.
- Search for the diamonds in your backyard, the low-hanging profit opportunities that can be made with minor tweaks.
- Present the best path for tweaking your investment game-plan so you can build wealth faster, with more predictability and stability.
Schedule your PROPERTY PROFITS STRATEGY SESSION today.