Real estate has produced more wealth than any other industry, but people still remain sceptical about entering into the fray. There are so many vacancies, and construction is still ongoing. This may be signalling a future oversupply, a future drop in rents and a fall in property prices. However, even with all this, there are still opportunities for money-making. That is if you know that you are doing. When you get an understanding of real estate, the path forward, you can make strides in investing in real estate.
Are you looking for ways to break into the real estate market with little to no money? Here are some methods you can use:
- Owner financing through lease options or private debt
- Taking over a distressed sellers mortgage payments
- Investing with a partner that has money
- Borrowing from the bank or getting a hard loan
- Using your Chama or other lending networks
Learn more: How to Become a Real Estate Investor this Year
Ways to Make Money in Real Estate
Here’s how you can generate an income with real estate:
#1: Residential Rentals
Rental income is the most traditional approach to making money in the real estate market. People will always need a place to live, and this need will earn you a good rental income. However, you’ll need to do proper due diligence to source for the best properties.
Keep in mind this age-old axiom: location, location, location.
A great location is everything when considering purchasing residential rentals. Carefully consider proximity and environment – the most important factors over and above the property’s condition. It plays a big role in how quickly you rent and also greatly affects your property’s value over time.
Investing in real estate 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 financial situation, you can easily grab property for little to no downpayment. Perhaps even invest in a pre-existing, income-producing property.
Learn more: How to Build a Passive Income Strategy
#2: Property Leases
Property lease is another great way to jump into the real estate train. You don’t need to have a significant amount of capital or even have great credit to start. This option allows you to lease with an option to buy. It works best when the market is rising. A rising market creates a situation where you can buy later at a previously pre-set price. Thus, giving you the option to buy the property at a discount. If not, you can also turn around and sell your rights for that purchase to another person.
Having a lease option (not mandatory to exercise) can be quite profitable. It can easily turn a profit as long as the market is going up.
#4: Fixing and Flipping
There may be some run-down properties out there that need a new lease on life. You can source out for them, purchase at a serious discount, fix them; and then turn around, and sell.
This may be the most time-consuming method. And, perhaps even the most costly, its the method with the greatest potential to turn the biggest returns. Buying a property, renovating it, and reselling it can be a hit or miss adventure. You’ll face a lot of unexpected problems, therefore ensure you have a substantial cash reserve.
#3: Vacation Rental
Vacation rentals are an even more lucrative path to profits in the real estate marketplace. When things turn back as close to normal as possible, vacation rentals as an investment will recover too. You can make a substantial income from vacation rentals. Potentially building up a passive income stream that you can live on.
Places on the countryside, the coast, lake regions and other scenic locations will be hotbeds for tourists as demand returns.
How can you get into this? You can either leverage a network of owners to manage their vacation rentals, build them or directly purchase these vacation homes. Once you have a property, just list on Airbnb and other similar online platforms.
#4: Commercial Real Estate
Commercial real estate is the most lucrative source for both income and profits in the real estate market. Probably why many developers rush to build commercial real estate to service our growing economy. Business and individuals, will always need office space and retail space to run their businesses from.
Even as we transition into the digital space, physical locations to support online business models will be in high demand. As long as you are adding value for these businesses, you can generate a large income for yourself.
#5: Real Estate Investment Trust (REIT)
Investing in real estate investment trusts (REITs) will provide you with real estate exposure without a large time commitment.
REITs are easily accessible to everyone, as they are like stocks. With REIT, investors pool their money to invest in income-generating properties. These pooled funds are used to purchase, develop and manage properties. Most trusts will own and operate commercial real estate such as offices, apartments, warehouses, hospitals, shopping malls, hotels and more. Investors then earn rental income in the form of dividends. Typically, about ninety per cent of the annual earnings are returned to investors in dividends.
Learn more: How to Invest in REITs in Kenya
Keep it Simple
Real estate is one of the oldest sources of wealth generation in history. It has continued to grow and evolve over time, generating more and more wealth. Whatever method you choose, do not be fooled that you need to make it big to make it happen.
Once in, keep your cash flow positive. That is, income has to exceed your expenses. This concept of cashflows works well for particularly rentals: long-term residential, commercial and short-term vacation. However, it would be best to get in with enough cash reserve, good financial standing and no debt.
Real estate investing takes time and patience – start small and keep your expenses low. You’ll also need to substantially build up your knowledge of the industry over time to grow.
Happy Building!
Image Credits: Top by RODNAE Productions from Pexels
