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Making money in real estate is a dream for many but also a confusing and overwhelming idea when you’re first starting out. So how do beginners make money in real estate? With the proper steps, you can build wealth, protect yourself from inflation, enjoy tax advantages, and experience the joys of owning an appreciating asset!
We’ve compiled several beginner-friendly ways to make money in real estate even if you have no prior experience. Let’s get started!
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How Do Beginners Make Money in Real Estate?
The most common way beginners make money in real estate is through appreciation, which is an increase in the property’s value that is realized once you sell. This is the basic premise, but there are several ways to attempt to achieve a successful (and lucrative) outcome. Read on for strategies to make money in real estate.
Strategies to Make Money in Real Estate
This strategy is probably what comes to mind when you think of real estate investing. It can be lucrative and fulfilling, but don’t let HGTV and house flipping shows fool you, there is a lot more to it than meets the eye and it can be incredibly risky.
When flipping properties, you’ll need to renovate the property and typically take care of a number of repairs. It will depend on the property, but most properties that have flipping potential will need a substantial amount of work in order to get it up to market standards and yield a profit.
Contract Flipping or Wholesaling
Instead of flipping houses, you can flip the actual property contract and forgo a physical renovation. This type of flipping includes the transfer of the rights of a purchase contract to another buyer. This strategy involves bringing distressed sellers and property buyers together so you can make a profit.
When you lease a property with the option to buy, in a market where prices are rising, you may be able to make a profit when you have an agreed upon lower pre-set purchase price.
This can be a complicated strategy, but can pay off in the right situation. Short sales involve purchasing a home from a lender when the homeowner is behind on payments. You may then have to renovate the property if it’s in need of repairs or you may be able to turn around and sell it right away.
Over time, residential properties tend to appreciate, especially in growing areas. Take advantage of that appreciation by purchasing a property and holding on to it for a long period of time. You will need to rent the property out in the mean time and manage it yourself or hire a property manager. This is a less risky option than the above strategies, especially since you aren’t reliant on the current market conditions. This means if the market turns when you’re looking to sell, you can simply wait it out until you can get a higher price for your property, as long as you’re able to keep it rented.
Short Term Rentals
Many people are opting to invest in short term rentals or Airbnb’s because of the higher monthly returns they receive versus traditional long term rentals. This will depend heavily on the location of the property and saturation of the local market but it can be a lucrative and exciting investment opportunity, as well as provide a place the owner can enjoy for a vacation periodically.
If properties don’t interest you, or you’re looking to diversify your real estate portfolio, you can buy a piece of land in an up-and-coming area. From there you may want to hold onto it until it gains value, or you may want to build a house on it and sell it for a profit.
Can Real Estate Make You Rich?
Real estate is historically the top creator of wealth. However, the real estate market has boom and bust cycles, and investments can carry risk no matter which strategy you pursue. There is risk in any type of investing that you should be aware of before getting started.
How Can I Invest in Real Estate with No Money?
There are a few options to invest in real estate with no money or very little money. If you have no money to invest, you may have a harder time getting started but it absolutely can be done.
Your contribution will need to be money, experience or special skills, while you find a financial partner to put up all of the money for a flip or rental project.
For investors that have some money to put towards a real estate investment, but not enough for a full down payment or cash purchase, a syndicated deal may be a worthwhile option.
Investing in a syndication, or crowdfunded property, through companies like FundRise or Crowdstreet will allow you to invest in real estate and get a return on your money, without having to put up a huge amount of cash. This is also a great method of passive investing as it’s a completely hands-off approach to real estate investing, making it completely beginner-friendly.
Other Ways to Make Money in Real Estate
If you’re unable to invest in real estate, or don’t want to, there’s still plenty of money to be made in the industry. The top ways to make money in the real estate industry include:
Becoming a real estate agent
Starting a property management company
Managing/co-hosting short term rentals and Airbnb’s
Finding distressed properties and leading investors to it, then charging a finder’s fee
Create a local real estate blog and charge agents to advertise on it