8 Proven Ways to Make Money in Real Estate

Invest in Rental Properties is one of the best ways to generate a continuous source of income. And if you do it right, you could manage to live off from this single source of income.

The key is to look for properties with low risk and a steady rental income. For instance, condos in Canada have always been so popular. Single persons, a couple, immigrants, and alike; all are looking for these homes.

In Brampton, a single bed + bath condo rental amount ranges between $1,600 and $1,900. And the average purchase value of a single bed + bath condo is somewhere around $400,000. This gives you an average return of 0.4% monthly ($1,600/$400,000 in percentage). And say if you resale the condo after 5 years for $500,000, the ROI would be around 25%.

Like said earlier, look for the best property with the lowest risk and a good return. If you find acquiring a commercial property is better than buying a condo, go for it.

Before you invest in a rental property, do consider the below elements and invest in the one with the best outcomes:

  • Property taxes
  • Annual increment in the rental amount
  • Acquisition expenses
  • Location
  • Other expenses related to acquiring, keeping, and selling the property

Make Money by Flipping Real Estate

This way of making money from real estate is relatively new and sounds interesting. You buy a house in poor condition, spend on renovations and repairs, list it for sale, and get back your investment with a profit margin.

But this is not as easy as it sounds. Finding such a property is not a hard task. The challenge comes after you acquire it.

What if your initial estimations to fix the house were wrong and require more expenditure than your expectations? And if you have fixed the house, but buyers refrain from buying it?

For instance, imagine you acquire a 4+3 bungalow in Brampton for $800,000. You spend around $15,000 on its renovations, $10,000 in upgrading, and another $3,000 on the repair. And then paid taxes of (assuming) $4,000. The total expenses incurred reached $32,000, making the house’s total value to be $832,000. From your analysis, you found that an average cost of a bungalow in the areas is around $850,000, giving you a margin of $18,000 (which is still not that bad). And list your house in the listings of bungalow for sale in Brampton. And wait for an offer. But no response, or even after viewing the house, you got zero offers.

Flipping properties requires deep knowledge of the real estate market. So, if you still want to take a risk and invest in flipping properties, do yourself a favour and gather as much knowledge as you could. Your typical questionnaire may include:

  • What people are buying now and what they would prefer six months later?
  • What is the best time to buy, renovate/remodel, and sell a property?
  • What is the best location to acquire a flipping property (based on the government’s policies and trends)?
  • How much should you spend on renovations?
  • Should you equip the house with upgraded appliances or leave that part on to the buyers?

There could be a huge list of questions you must first answer. Once you get positive responses and are willing to take the risk, only then invest in flipping properties.

Make Money with Real Estate Investment Trusts (REITs)

This is a passive income; you invest in real estate without actually investing in it and getting good returns. Real Estate Investment Trusts or REITs can be invested in mortgages, properties, or both. REITs allow you to spread your investment while minimizing the risk.

REITs are either publicly traded or privately traded. Publicly traded REITs are more liquid assets, just like stocks or bonds.

Other than the profits you gain from reselling REITs, you could also expect dividends.

Investing in Real Estate ETFs and Mutual Funds

An alternative (or additional source) way of making money from real estate is investing in exchange-traded funds (ETFs) and mutual funds.

You could invest in ETFs invested in real estate stocks like publicly-traded home builders. Then there are mutual funds allowing you to invest in real estate management firms.

These funds are relatively less risky and have low costs attached to them. They do not require high investments. However, unlike REITs, you are not entitled to receive dividends.

Privately Lend to Make Money from Real Estate

This is similar to investing in saving accounts. You invest an access amount with real estate firms. They use all the investment they receive from different investors and invest that sum in buying a piece of property. And then make profits by selling that property, giving out your share of the investment.

This form of investment is less risky as you usually invest with firms or individuals you personally know. You could always reach out and ask as many questions as you could.

The only problem is that your investment is stuck until that firm or individual sells that property. It could take a month, six months, or even a year to sell them the property and then release your investment with returns.

Invest to Resale

This kind of investment is at low risk with a steady outcome. For instance, you buy a bungalow today for $1,000,000 in Brampton. You keep it for two years with an intention to resale it at a profit. It is estimated that only in 2021 houses are expected to appreciate by 5%. So your bungalow bought today for $1,000,000 could be sold for somewhere around $1,050,000 within a year. That gives you a profit of $50,000 in a year.

You could further increase the value of the house by upgrading it. For instance, you know what people like in their bungalows. You renovate the house accordingly, put it on the list of bungalows for sale in Brampton, and sell it for more.

Invest in Vacation Rentals

This is another way to earn a steady income over the period you own that vacation home. Though vacation homes are not occupied throughout the year, when they do, they give you more rental value than from renting a unit.

One of the best parts of acquiring a property is that you could always sell them out and gain an additional profit.

Renting a Spare Room

This investment opportunity is best if you do not have large amounts of investment. But a room to rent. Although these rooms are not very popular, they still are a good source of income.

If you have a spare room or space, you could advertise it on the internet and attract single persons to say immigrants to acquire on a short term basis.

Renting out a spare room serves you in different ways; they could reduce your home mortgage or give you an extra income source. In either way, your spare room or space could become your asset, generating passive income.

Reselling Principal House

These should be your last resort to making money via real estate. As real estate always bloom and groom, you could expect profits. The only challenge is that you would no longer be the house owner and then would be looking for a new home, which may cost you more than the one you just sold.

However, if you plan properly, you could always reinvest the sum from the sales proceeds. If currently, you own a bungalow valuing a million-dollar, you could buy at least two condos and rent them out. And if there is still something left with you, you could invest the remaining amount in REITs, ETFs or mutual funds.

However, keep in mind that selling the house you live in should be your last option. As already said, the residential properties are expected to rise by 5% in Brampton. If you expect a profit from reselling the house, you should also expect buying a house with an appreciation of 5%.

Which Option Does Best define Your Investment?

Real estate worldwide is always growing, if not in the shorter run, at least in the longer run. This makes it more favourable and less risky. You could buy a property and resell it for a profit, you could rent a property and gain an extra income source, or you could invest in REITs or mutual funds to make money while not holding the property.

The options to make money from real estate is quite enormous and promising. Which option would you choose in 2021 to make profits from real estate?