5 Ways to Make Money In Real Estate
By Paul Esajian on February 26, 2018
The thought of working on multiple projects, running a team and building a portfolio is the goal for many new investors. The reality is that while these are attainable they don’t happen overnight. It takes months, even years, to build up a network and accumulate all the necessary capital. It is easy getting frustrated and disenchanted with the process as you are putting everything in place. However, if you can find a way to keep things moving you will eventually reach your goal. The key is looking for projects where you can earn income on everything you do. Earning a little at a time may not make you an overnight success but it will increase your contacts and more importantly help build your bank account. Here are five ways you can make money in real estate, especially when you don’t have any.
- Property manager. Do you work with investors who own rental properties? Are you good with people and easily accessible? Are you handy or know people who are? If you answered yes to these questions you should consider property management. As the name indicates a property manager runs every aspect of a rental property from finding tenants to scheduling a plumber. You are the buffer between tenants and owner. There may be months when you literally don’t do a thing for the property. However, there are times when you will go to the house three times in a week. Most property managers get 10% of the monthly rent received. This certainly won’t make you rich, but it will provide some income and give you an idea of how a property is run. Put together a resume, reach out to your investor contacts and see how you can help with their properties.
- Wholesale. The most common way for would be investors to earn real estate related income is by working on wholesale deals. A wholesale deal is where someone (you) gets access to a discount deal and then passes the deal off to an end investor. In most cases these deals are from distressed homeowners who are late on their mortgage, in foreclosure, divorce or simply want to sell quickly. The key is to get the homeowner to agree on a price low enough that is still attractive to an end investor. Most wholesalers earn a flat fee depending on the type of deal they provide. This number can be anywhere from a few hundred dollars to $5000, or more if the deal is attractive enough. A proven wholesaler can also ask for a small percentage of the profits if the deal is a real home run. They can ask for a certain percentage based on a sales price range with the higher sales price more income for them. Finding wholesale deals isn’t easy but between the MLS, networking groups, bandit signs and local contacts you an easily find a few wholesale deals a year.
- Partnership. Are you sick of finding good deals only to give them to an end investor and earn a fraction of what you expected? If you are finding good deals and tired of giving them away, you should look to work with a partner. There are many people out there who have money to invest but don’t have the time or desire in scoping out the deals. Perhaps you know a friend, family member, co-worker or fellow investor who has money to invest but isn’t sure just how to go about it. Here is where you step in and make a proposition. You can handle everything with the deal and they can simply be a financial partner. You may not make an even split but you will earn considerably more than wholesaling the deal. Your partnership can last for a given deal or be more of a long term, mutually beneficial arrangement.
- Tax liens. Once you have a financial partner in place it will open doors to find new deals. One way to find deals in a nontraditional method is by acquiring tax liens. A tax lien is put on any property with delinquent taxes. What makes them unique is that they are in first lien position. After taking possession of the tax lien, the homeowner has a redemption period in which they can repay the lien and keep ownership of the property. If so, you earn a fixed interest rate based on the specific state of the property. If the homeowner does not pay you can settle with the other lien holders and take outright ownership of the property. For just a few thousand dollars you can purchase a tax lien with a guaranteed interest rate and the ability for a much greater upside.
- Hard money broker. Do you know investors who are looking for hard money? Every investor should have a handful of hard money lenders they can call at any time. If you have a few established relationships you can use them to your benefit. If there is a specific deal you can talk to your lender about how you can earn a referral bonus. Most hard money guys are generous with referrals, especially if the buyer develops into a long-term relationship.
The more you put yourself out there the more opportunity you will have to generate additional income.