HOW TO MAKE MONEY IN REAL ESTATE: 36 TIPS FROM THE PROS
There are many ways to make money in real estate. Experienced real estate professionals suggest options such as selling niche listings (like FSBOs), engaging in mortgage lending and investing in tax liens. For advice on how to become profitable in the real estate industry, review the 36 tips from real estate experts below.
Here are the top 36 tips from industry insiders on how to make money in real estate:
1. Source for Sale by Owner (FSBOs) Listings
Nicholas Thomas, Performance Marketing Relationship Manager, Fit Small Business
When you’re looking for high-quality leads, consider sourcing for sale by owner (FSBO) listings. While you can do this yourself, it takes time—time better spent making a sale. Instead, try using a lead generation tool like REDX, which will deliver valuable FSBO leads up to 24 hours before any other service. It even finds missing contact information and verifies it against the Do Not Contact (DNC) list. Find out more about RedX FSBO listings today.
2. Become a Short-term Property Manager
Ajay Kumar, Co-founder & CEO, TheHouseMonk
With the growth of global tourism, short-term accommodation is the need of the hour. Although property owners can post listings and manage guests themselves, it’s not easy to give the level of service that travelers expect. This has given rise to short-term rental property managers who work on renting out the property and managing the services on behalf of landlords. Short-term rentals is a growing industry and a good opportunity for agents and property managers to make extra income, even if not pursued as a long-term business opportunity.
3. Invest in Cities With Future Growth Potential
Karla Stefan Singson, Events & PR Lead, PREP – PR, Events & Promotions
Invest or consider investing in next-wave cities (cities with high projected growth). There are about 10 to 20 cities in every country that qualify as next-wave based on economic growth. This can be easily accessed through records in your relevant government office. I’d advise buying properties there.
4. Avoid Capital Gains Taxes on Flips
Logan Allec, CPA & Owner, Money Done Right
Typically, when you flip a house, you have to pay taxes on your gain. But there is an exception in Section 121 of the income tax code that says if you live in a property for at least two out of the five years preceding the date of sale, you can exclude up to $250,000 of your gain on the property. This number doubles to $500,000 for married taxpayers filing jointly. So, if you’re considering doing a high-end flip, consider this strategy to maximize your after-tax profits.
5. Join Virtual Brokerages to Earn Higher Splits
Tamir Poleg, CEO, Real
Joining a real estate brokerage firm is a great way to receive consistent leads. Try joining a virtual brokerage so that you can work from wherever you want. Real, a tech-powered brokerage, is able to generate leads for their agents online and offer up to an 85% split because they cut overhead costs by not having to pay for an expensive office lease. They even offer agents their own personally branded app—all for no monthly fee. Click here to get started.
6. Buy Investment Property at Value
Susan Naftulin, Co-founder, Rehab Financial Group
Distressed homes can be a great investment opportunity. Make sure you are paying for what the house is actually worth (or less). Sellers will often price struggling properties based on what they could be worth, but don’t fall for that. Offer only what makes sense to maintain your return on investment.
7. Calculate Transaction Costs to Save Money
James McGrath, Co-founder, Yoreevo LLC
Take transaction costs into account when you’re buying and when you eventually sell. Given sellers typically pay the largest transaction cost (broker commissions), that can have a material impact on your real return.
8. Purchase & Rent Multi-family Apartments
Shelly Persaud, Co-founder, Simple Solution Homebuyers
As long as people need a place to live, they’ll likely be renting, and so you have the option of purchasing a multi-family home and then gaining monthly income by renting to tenants. You can work with a property management company to make this more sustainable if you’re busy, or use a number of apps and software solutions to help automate the management.
9. Invest in Non-performing Notes
Dave Van Horn, President, PPR The Note Co
Non-performing notes are mortgages that borrowers are behind on. Instead of foreclosing on the property and selling the home, lenders instead sometimes sell the non-performing mortgages to investors at a deep discount. There can be a great deal of financial risk investing in non-performing notes, so proceed cautiously. Lengthy legal battles to foreclose and get a clear title can cost investors tens of thousands of dollars in legal fees.
10. Sign-up for Zillow Premier Agent
Christopher Linsell, Real Estate Writer, The Close
Zillow Premier Agent (ZPA) gives real estate agents the ability to generate quality leads from traffic to their top-ranked realty website. With an advertising link and contact form for the agent on each property site the buyer visits, the number of leads an agent receives increases and the quality of the leads are better. Check out Zillow Premier Agent and find out more about their lead generation.
11. Become a Trainer & Mentor
Nancy Wallace-Laabs, Broker, KBN Homes, LLC
If you have been in real estate for a number of years, you might have the opportunity to charge people for your knowledge. If you have a successful and proven track record of real estate transactions, you could be in the lineup for selling your knowledge, writing a book, or developing a training program that outlines a successful method of lead generation.
12. Consider Hard Money Lending
Jerryll Noorden, Owner, WeBuyHousesInConnecticut
If you find a great deal, but have no money to buy or rehab the house and you have no means to get a traditional loan, you can do hard money lending. This is, in simple terms, a loan from private investors secured by real property. One basically borrows money against the property they are buying. The money will be paid back after the house is renovated and sold (usually at a high interest rate). If you have money and it is not making you money, you can be a hard money lender. Let your money work for you, making you more money.
13. Call Landlords to Get Listings
Robert Rahmanian, Principal & Co-founder, REAL New York
Representing owners and landlords will help set yourself apart from the average agent. When you are representing an owner or a landlord, you are in a powerful position to meet buyers and renters and service them in the best way possible.
14. Get Paid to Protect Foreclosed Properties
Alex Romanov, Real Estate Acquisitions Manager, iwillbuyhouse.com
Agents can work with banks to periodically visit foreclosed properties owned by the bank to verify that the property is not being illegally occupied by squatters. Fees vary depending on the location of the property and the bank that the agent is working with.
15. Educate Yourself With Real Estate Express
Miranda Paquet, Operations Editor, The Close
Getting your certification for home inspection or appraisal through Real Estate Express is a ticket to increasing your income in the real estate industry. You can offer additional services to other real estate agents during pre-sale inspection or an appraisal. Learn more about Real Estate Expresstoday.
16. Invest in Flipping Houses
Seth Williams, Founder, REtipster.com
Real estate and investment professionals often find homes that are undervalued, then put them under contract. They add contingencies to the contract that stipulate they will assign the contract to another buyer within a certain (usually very short) amount of time. They then work to find a buyer who is willing to pay slightly more than the price they are under contract for and assign the contract to them, keeping the difference as a profit at closing.
17. Lease Commercial Real Estate
Connie Rankin, LEED, AP, President, Customized Real Estate Services
The demand for office and commercial space is only going up. Leasing commercial real estate can be far more lucrative than leasing apartments. The rationale here is simple: Since commercial leases are often five years or longer, commissions in commercial real estate are often much, much higher than in residential real estate. You can even negotiate to be paid a portion of a business’ profits as your commission.
18. Diversify Your Inspection Services
Bill Erickson, Executive Vice President, National Property Inspections, Inc.
Pre-listing inspections are growing more popular as sellers seek valuable information about the condition of their home so that they can receive top dollar at closing. New construction draw inspections—checks performed at various stages of the building process to help ensure the major components of a home are installed correctly—is also a growing category. These are only a few among many opportunities to put an inspector’s skill set to work.
19. Sell Commercial Real Estate
Bruce Ailion, Real Estate Broker & Attorney, Location Location Location
Commercial brokerage is the place for ultra-high income. Success here means $250,000 to 750,000 annually, and top producers regularly make $1,000,000 a year or more. This area is not for everyone, though. It’s a high stakes, high risk, high reward business. This year, I worked on a transaction for six months, invested $15,000 in hard costs, and one of the parties backed out the week the transaction was to be consummated. $90,000 in commissions went out the window.
20. Create Seller Opportunities With Zurple
Emile L’Eplattenier, Managing Editor, The Close
Zurple is a unique lead generation software that targets seller leads. Once the seller responds to an online ad placed through Zurple, the software’s CRM tracks the lead and automatically responds with emails to every seller action on your website. Instead of wasting time tracking down sellers, you can let sellers come to you. Find out more about Zurple today.
21. Fix Property Management Issues
Chike Uzoka, Founder, Valentine Property Holdings
Without the right property management, any property—whether a multi-unit residential, retail, or commercial building—is not being run efficiently. Good property management companies fix problems when they arise; great property management companies fix them before they happen.
22. Try Real Estate Crowdfunding
Matt Humphrey, CEO, LendingHome
There’s never been a better time to invest in real estate via crowdfunding and marketplace lenders. In particular, renovating residential properties for resale can be a lucrative opportunity as home-flip activity reaches a six-year high.
23. Consider a 1031 Exchange
David Wieland, CEO, Realized1031.com
Section 1031 of the IRS code allows real estate investors to sell investment properties in exchange for a “like-kind” property of equal or greater value. For example, you could sell your two-family rental and co-invest in say, a shopping center or office building. Sure, this doesn’t sound that exciting until you learn that under a 1031 exchange, you won’t pay a dime in capital gains tax.
24. Try House-Hacking & Live for Free
Dana Bull, Realtor, Investor & Real Estate Coach
The basic concept [of house-hacking] is that you purchase a property and rent out parts of it to collect income and help offset your housing expenses. You could purchase a two-bedroom condo and rent out one of the rooms, or you could buy a multi-family property, live in one of the units, and lease out the others. If you’re looking to build your real estate portfolio, house-hacking is a great way to gain experience with landlords and property management.
25. Build an Effective Website
Allie Potts, Sales Editor, Fit Small Business
In commercial real estate, 80% of potential tenants and investors start their search online, which means that you need an IDX-enabled website that can capture traffic and convert visitors into potential prospects. One of the most effective—and easiest to use—IDX website builders on the market is Placester. You can design each page the way you want with MLS listings, lead capture forms, and more. Check out all of Placester’s features and build your own site today.
26. Sell Short Sale Properties
Elizabeth Weintraub, Realtor, Sacramento Real Estate
A short sale is when a lender decides to sell a home for a discounted price to release an existing mortgage. In most cases, lenders pursue short sales when the borrower is in default (the step before foreclosure), but this is not the only time they might use a short sale. Sometimes, the borrower might be current but owe more money than the home is worth.
27. Invest in Short-term Rentals
Andrew McConnell, CEO, Rented.com
As travelers increasingly prefer “alternative accommodation” options to hotels, the rental demand for such properties increases. This increased demand leads both to greater occupancy and to higher nightly rates. We have seen a number of markets where, on average, you can expect a double-digit capitalization rate, with individual opportunities far exceeding even that.
28. Convert More Website Leads
Joe Samson, Owner, GreatCalgaryRealEstate.com
Attracting leads to your website is usually the largest hurdle that many folks can’t seem to comprehend. But with the endless options of online advertising, you can drive traffic to your landing pages almost immediately. If you have decided to focus on increasing your digital footprint, then improving the number of leads that sign up on your website can bring a huge boost to your income.
29. Invest in Real Estate Tax Liens
Michael Trickey, CPA & Author, Founder of Finding Home Books, LLC
Counties hold annual auctions of delinquent taxes. The county places a lien against any home where taxes have not been paid and sells those liens to investors at the auctions. Each homeowner has a statutory period in which they can pay the back taxes. During this time, the investor earns a rate of interest on the lien. The rate of interest is determined at the auction, where investors compete by bidding down the rate of interest they are willing to accept.
30. Find & Purchase Pre-foreclosures
Erik Wind, President, GeoData Plus
Pre-foreclosures, also referred to as “lis pendens,” are often filed by a mortgage lender when a borrower is no longer making their mortgage payments. It’s the first notice to the public that property is facing foreclosure. There are numerous listing opportunities—many of which are not even short sales. For an investor, careful analysis of pre-foreclosures will lead to the discovery of properties that can be purchased below market value.
31. Focus on Lease-to-Own Properties
Keisha Blair, Co-founder, Aspire Canada
This is a way to open up your property to an additional pool of renters that would love to own one day but are not in the market for a mortgage just yet. These renters can typically pay more than the average renter and can offer a small down payment. The first step is to design a lease-to-own structure that is fair to both you and the tenant. If they don’t end up buying the property, you still end up with better income, and if they do, you have an exit strategy for the property and you can move on to more investments.
32. Build Granny Flats & Rent Them Out
Seth Phillips, Realtor, SP3 Realty
Many states allow homeowners to build a separate living unit on their property and rent it out. California just passed a new Accessory Dwelling Unit (ADU), or Granny Flat, law that allows owners of single-family homes to build additional rental units on their properties to help ease the housing shortage.
33. Tap Corporate Housing Rentals
Kimberly Smith, Founder, AvenueWest Corporate Housing
This is an enormous and largely untapped potential rental income stream. Corporate housing investments can substantially increase the returns on your residential investments while also reducing your pain-per-dollar compared to vacation rentals. Corporate housing has emerged as more than just an essential business service for relocated or traveling business executives. Today, corporate housing is a full-fledged lodging solution for everyday individuals who need short-term housing that has the space and convenience of a home on the road.
34. Become a Home Inspector
Welmoed Sisson, Licensed Home Inspector & Co-founder, Inspections By Bob
A great home inspector is basically a superhero for anyone trying to buy a home. A few hundred dollars spent hiring one can save you endless headaches and a suitcase full of money. It’s also a great career for people with construction knowledge who want to own their own real estate business. In a rising market, home inspectors can command premium rates.
35. Fix & Flip Houses
Than Merrill, CEO & Founder of FortuneBuilders & Star of A&E’s “Flip This House”
Fixing and flipping houses is an excellent short-term real estate investment strategy. In order to make money, house flippers search for undervalued homes that need renovation, then renovate and sell those homes for a profit.
36. Buy & Sell REO Properties
Danny Johnson, Real Estate Investor & Founder, Flippingjunkie.com
A bank-owned or real estate-owned (REO) property is a property that has gone through the foreclosure process and failed to sell at the foreclosure auction. In some ways, buying REO properties can be much less risky than buying homes at foreclosure auctions. Once a property is back in the bank’s possession, the lender clears the title of any liens, evicts tenants if needed, and might even do basic repairs to get the property in shape to be sold.
Bottom Line: How to Make Money in Real Estate
Making money in real estate can be challenging, but there are several ways to do so successfully. These include investing your own money in rentals, becoming a property manager, or adding a niche market—like corporate rentals—to your portfolio. But this is only the beginning; peruse our 36 expert tips above for more money-making ideas.