Content of the material
- Final Thoughts
- Whats the Best Way to Make Money in Real Estate?
- How to make more money as a real estate investor
- Do more deals
- Get a mentor
- Improve at least one skill
- Change your location
- Increase your rents and prices
- Real Estate Investor Education Training / Sales Rep
- Rental Income as a Margin of Safety
- Average Rental Property Owner Salary
- Inflation and Real Estate Investing
- 1. Online Real Estate Investing Sites
- How It Works
- What You Gain
- What You Risk
- Other Ways to Invest in Real Estate
- Frequently Asked Questions
- What’s the average real estate investor salary?
- Do I need a real estate agent?
- Can you do real estate on a part-time basis?
- Real Estate Investor, Recruiter, $200K 1st Year Potential
- Family matters
- How to Increase Your Rental Income
It’s important to understand how real estate agents are compensated when considering the field. If you look at every real estate license, the average home sale per license is one every two years. That means many agents aren’t making much money.
As a consumer, when you hire an agent, you want one that it’s the top 10% of earners. This proves they have a track record of selling homes in your area. You probably don’t want one that only sells 1-2 homes per year, even if they give you a good break on commissions.
Whats the Best Way to Make Money in Real Estate?
If you can stomach hearing no several times a day and maintain a constant follow-up file with all wholesale offers made, you will make more money in Real Estate than most “house flippers” you see on TV.
Money can be made in Real Estate in several different ways. I will never claim a particular technique is not worthy of your time. They all work, some just better than others.
The smartest and best investors do not focus their time solely on rentals or rehabs, and they never swing a hammer or do rehab work themselves.
The best and most successful Real Estate investors are the ones who focus on being transaction engineers and becoming masters of negotiation, relationships with other investors and accepting the fact that the real money is made in pushing paper, not hammering nails.
As you grow in your Real Estate investing career, you will always want a constant portfolio of different types of transactions going on at the same time. Some investors focus on one particular strategy and make a lot of money.
However, I would rather have the knowledge to take any deal that came my way and turn it into cash. I constantly have a steady stream of wholesales, lease options, rehabs, new construction, and anything else I can get my hands on.
As previously stated; all of these strategies (and many more I have not mentioned in this article) have their place and can make money fast. However, for the new investor, dead set to make the millions of dollars promised by the “Gurus,” focus on Options and Wholesale deals.
How to make more money as a real estate investor
As you can see, your estimated salary as a real estate investor can vary greatly. Fortunately, investors have a lot of control in their careers. That means if you're not making what you want or just want to scale up, there are plenty of steps you can take to do so.
Here are just a few ways you can improve your earnings as an investor:
If you've only flipped properties or rented out single-family homes, expand into other forms of real estate investing. Add a few vacation homes to the mix, try a multifamily property, or give wholesaling a whirl. You'll increase your earning potential — plus, you could find something you're really good at or just enjoy more.
Do more deals
This one's pretty simple: The more deals you do, the more you'll earn. If you're only doing five flips per year, think about adding another two. If you have two rental properties, consider a third (maybe even a duplex or triplex to really increase those earnings). Just keep in mind that the bigger your portfolio grows, the more work you'll be required to do. So be prepared and set aside the time (or team) to do it.
Get a mentor
If your real estate career isn't quite panning out, then look to someone who's come before you. Many successful real estate investors offer coaching and mentoring programs, and they can help guide you on growing your career and your earnings. Attending networking events is a great way to find a potential mentor. You can even ask your favorite real estate agent for some recommendations in the area.
Improve at least one skill
Read, take classes, and make it a point to improve at least one of your basic investing skills. If you improve your negotiation skills, for example, it might mean lower costs and higher returns on your next flip. If you increase your knowledge of carpentry, it could reduce rehab costs down the line. Even small, incremental improvements in your capabilities can make a big difference on your bottom line — and your real estate business as a whole.
Change your location
The data above spells it out: Real estate investing returns vary widely depending on where you're active. If your properties aren't delivering the return on investment (ROI) you've been hoping for, then branch out location-wise. Try a real estate investment in a new city or even a new state. Just be sure to do your research and identify the real estate market with the highest potential possible before diving in. You'll also want a plan in place for how you'll manage the property (or just the deal) from far away.
Increase your rents and prices
Obviously, if you charge more rent or price your flips higher, you'll make more cash. You'll just need to be careful here and make sure the price hike is justified. If it's not, you might find yourself with a vacant property — and that can hurt your earnings (and cash flow) more than anything.
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Rental Income as a Margin of Safety
Rental income can be a margin of safety that protects you during economic downturns or collapses. Certain types of real estate investments may be better suited for this purpose. Leases and rents can be relatively safe income.
To go back to our earlier discussion—about the challenges of making money from real estate—office buildings can provide one illustration. Typically these properties involve long, multi-year leases. Buy one at the right price, at the right time, and with the right tenant and lease maturity, and you could sail through a real estate collapse. You would collect above-average rental checks that the companies leasing from you have to provide still—due to the lease agreement they signed—even when lower rates are available elsewhere. Get it wrong, though, and you could be locked in at sub-par returns long after the market has recovered.
Average Rental Property Owner Salary
When you focus on investors who buy and hold rental properties, the average salary for rental property investors changes to a range of $27,500 to $121,000 – an even wider swing than for investors overall. A big reason why these numbers aren’t accurate is that rental property owners are small investors who own one or two rentals.
When you take out monthly property expenses from your rental income, it ends up being decent — not so much the sizable amount one would expect, especially for investors who are just starting. On the upper level of the scale though, we can find rental property investors who make six-figure incomes on top of the property assets they already have.
Inflation and Real Estate Investing
When inflation happens, a dollar has less buying power. It happens because the government has to create—print—money when it spends more than it takes in through taxes. All else equal, over time, this results in each existing dollar losing value and becoming worth less than it was in the past.
One of the ways that the savviest real estate investors can make money in real estate is to take advantage of a situation that seems to crop up every few decades. They do this when inflation is projected to exceed the current interest rate of long-term debt. During these times, you might find people willing to gamble by acquiring properties, borrowing money to finance the purchase, and then waiting for inflation to increase.
As inflation climbs, these investors can pay off the mortgages with dollars that are worth far less. This situation represents a transfer from savers to debtors. You saw a lot of real estate investors making money this way in the 1970s and early 1980s. Inflation was spiraling out of control until Paul Volcker Jr.—Federal Reserve president between 1979 and 1987—took a 2×4 to its back and brought it under control by drastically raising interest rates.
1. Online Real Estate Investing Sites
Online investing sites have changed the game in recent years. With these sites, you can own fractional shares of real estate projects. What this means is that you can get exposure to real estate, but you don’t need to come up with huge sums of capital or deal with tenants. This is a strictly passive income strategy.
For other sites, you must certify that you have a net worth over a certain amount or make a certain amount of money per year.
How It Works
With Fundrise, you can start with as little as $500. You open an account and select from a number of portfolio options. Fundrise charges a management fee of around 1% per year, which is fairly low compared with other options, and its 2021 annualized return was 22.99%! You can see how my Fundrise account has performed here.
What You Gain
Investing this way, you gain a ton of freedom and you gain exposure to the real estate asset class with very little money or effort.
What You Risk
You don’t get to really use any local expertise you may have, and you don’t necessarily get the pride that comes from visiting a real estate project that you wholly own, improve, and can see easily. For some people, that’s a big draw to investing the old-fashioned way!
Get Started With Fundrise
Other Ways to Invest in Real Estate
One option is an informal residential real estate option, which requires that you pay a fee, or premium, to have the right to buy a house for a specified period for an agreed-upon price. You then find investors who will pay more than your option price for the property. In this case, the premium you get is essentially a finder’s fee for matching a person looking for an investment with a person looking to sell—no different than a real estate agent’s commission, really. Although this is income, it doesn’t come from owning (i.e. holding the deed to) a piece of real estate.
Other options include:
- Short sales—this involves purchasing a home from a lender when the mortgagee is behind on payments. Short sales can be a time-consuming and complicated proposition.
- Lease options—these are what the name implies. When you lease with an option to buy in a bull real estate market, where prices are rising, you may be able to complete the purchase later at a lower, pre-set price, or make a profit by selling your purchase rights.
- Contract flipping—instead of flipping houses, this type of flipping involves the transfer of the rights of a purchase contract to another buyer. If you can locate distressed sellers and motivated buyers and bring them together, you may be able to make a profit this way.
Frequently Asked Questions
What’s the average real estate investor salary?
Recent estimates put the average salary around $124,000 annually. But remember that as a real estate investor, you won’t make a fixed salary. Your money is going to come from the individual investments you make, and you can also lose money (meaning you have a negative salary).
If you play your cards right, you can earn a steady cash flow and make large gains when selling properties.
Do I need a real estate agent?
A thousand times yes! Having a real estate agent is a very smart move and generally worth every dollar you’ll pay in commissions and fees.
Real estate agents can provide expert knowledge of the local market. A realtor can also help you maximize rental income and save money on costs that you might not otherwise consider.
Can you do real estate on a part-time basis?
Most beginners start off investing in real estate on a part-time basis. Eventually, you might make enough in residual earnings from rental properties and REITs that you can live full-time off your investments. However, it’s going to take some time to get to that point.
To make it easier while working a separate job, consider hiring a property management company to handle operations.
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Mehta has always worked hard. He was born and raised in Baltimore, where he lived with his parents, immigrants from India, and his three older siblings.
His mother owned a few businesses and his father was a doctor, and for most of his childhood, the Mehtas lived comfortably. But they lost much of their wealth during the market crashes of 2000 and 2008, he says.
That instability drove him to want to earn his own money from a young age: He would sell candy bars between classes in middle school, and got a part-time job at a country club in high school.
The Mehta family on a trip to Ellis Island.Courtesy of Sahil Mehta
"Our parents never wanted us to be stressed or pressured," he says. "But, inadvertently, seeing what they were doing to provide for us was a lot of pressure."
In 2014, he visited his brother Sparsh, 31, at UC Berkeley, and knew instantly that's where he belonged. He moved to California to spend his senior year at Berkeley High School, bunking with his brother in college housing and working at Chipotle to earn money on the side.
At the same time, he discovered he could earn college credits at the local community college that transferred to UC Berkeley. He earned enough to enroll in college as a junior.
Sahil Mehta, center, and his sibilings.Courtesy of Sahil Mehta
He worked throughout his two years at Berkeley to cover tuition, and paid off a $10,000 federal loan shortly after he graduated with his Sotheby's income. He says he had no assistance from his parents paying for his education.
"I was trying to be entirely self-sufficient," he says. "I needed to do it myself."
How to Increase Your Rental Income
If you intend to augment your salary as a rental property investor, there are certain actions that you can take. Investors encourage the buying of as many properties as you can yearly. There are those who go for a different approach like better real estate deals that give higher returns. Other investors may branch out and invest in up-and-coming markets, hoping to capitalize on growth in new markets.
Don’t forget to make sure you optimize the rental income of all of your properties. It’s easy to miss out on additional earnings when you’re not careful going over things. You can take a variety of steps to increase your rental income on your properties. A very practical way of doing so is by making sure your property is in immaculate condition so that you can charge more rent. And, when speaking of how much to actually charge for rent, don’t forget to look at your local market assessments to know which price point is best for your rental.
If all of this has you feeling a bit overwhelmed, you may want to consider bringing in Fairview property managers who are local market experts and can help you make the most of your rental properties. To learn more, contact us online today.
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