Real estate is one of the best ways to make money, but it’s important to have a good plan. Whether you’re just starting out or want to get better at real estate, this blog will show you easy ways to make more money. You’ll learn about wholesaling, flipping, and other strategies to help you succeed.
By the end, you’ll know how to find good deals, pick the right strategy, and make improvements that increase your profit. Let’s get started and see how real estate can help you reach your goals!
Wholesaling vs. Flipping Houses
Many people start in real estate by wholesaling because it’s fast and doesn’t need much money. Some think flipping houses should come next, but that’s not always true. Wholesaling is great for quick profits without the stress of big risks or renovations.
This initial reflection speaks volumes about understanding your strengths and the strategies that work best for you. Wholesale real estate involves owning the property briefly or assigning it to another buyer, yielding quick profits and less hassle.
Why Wholesaling is Awesome
Wholesaling is one of the easiest ways to make money in real estate. Here’s how it works: Find a distressed property, secure it with a contract, and sell the contract to another buyer for a fee. You don’t need to hold the property long, so you save time and avoid big risks.
Focusing efforts on wholesaling could yield multiple deals within the time it would take to renovate and flip a single property. This point brings us to the importance of deal analysis and choosing the right strategy based on your goals.
How to Analyze a Deal
Before jumping into a deal, it’s important to look at both the property’s current value and its future potential. Ask yourself: Can I make improvements to increase its value? Picking neighborhoods that are growing can also lead to better profits.
Functional Obsolescence is a term you'll often encounter. It refers to properties with old designs that don't meet the current market expectations and thus have reduced utility or desirability. Forcing appreciation involves updating these properties to align with today's buyer preferences.
An Example: Fixing an Old Property
Imagine you buy a one-bedroom home with no laundry. You could add a washer and dryer, turn the dining room into a kitchen, and make the old kitchen a second bedroom. These changes could raise the rent from $900 to $1,595! Small upgrades like this can make a big difference.
The 70% Rule for Profits
Use this formula to make sure you don’t overpay for a property:
- ARV (After Repair Value) x 70% = Your Maximum Budget
- Subtract Repair Costs = Your Offer Price
Exit Strategies: From Wholesaling to Buy-and-Hold
While wholesaling is fantastic for fast returns, transitioning to buy-and-hold strategies offers long-term wealth. Buy-and-hold is less about immediate profits and more about building lasting value through rental income and property appreciation.
A particularly popular method within this strategy is the BRRRR (Buy, Renovate, Rent, Refinance, Repeat). It allows investors to recycle their capital by refinancing properties after adding value through renovations, thus enabling the purchase of additional properties with the same initial investment.
Varied Real Estate Strategies
There isn't a one-size-fits-all approach in real estate. Besides wholesaling and BRRRR, other notable strategies include:
- Short-term and Mid-term Rentals: Ideal for markets with a high demand for temporary housing.
- Creative Financing: Techniques such as subject-to, lease options, and land contracts.
- Diversified Investments: Such as Airbnb arbitrage, storage units, and even hotel investing.
Final Thoughts: Stay Focused
Real estate has many ways to make money, but the secret is to stay focused and keep going. Whether you like the fast cash from wholesaling or the long-term gains from buying and holding, success comes from learning, planning, and taking action every day.
Pick a strategy that works for you and stick with it. Start small, work hard, and you’ll see the results. With the right effort and mindset, real estate can help you achieve the financial freedom you’ve been dreaming of!
