Investing in real estate is an appealing way for some people to make money. By making an investment in real estate, the goal of the transaction is to let your investment increase until you’re making money off of it in the future. The return (or profit) you get based on this accumulation will need to be enough to cover the risks that come with investment, the taxes you’ll pay on it, and other such costs that come with owning real estate. If you’re new in the real estate business, all of these factors can be overwhelming to take in at once. How will you make your money this way?
There are, in fact, several ways to earn back what you’ve spent on real estate:
Real Estate Appreciation
Real estate appreciation happens when a property’s value increases due to a change in the real estate market. If the location of your property has a shopping mall built nearby, the traffic in that area will likely become busier than it once was, which affects property value. Making modifications to the property to make it more attractive to potential buyers will also help with the property’s appreciation. The downside of real estate appreciation is that it’s a rather unpredictable game to play, which ultimately makes it riskier to get involved in rather than more stable sources of income.
Cash Flow Income
Another way you can make money off your real estate investment is to buy a building—an apartment building, self-storage spaces, office buildings, etc.—and generating cash flow income by renting out spaces in these buildings to collect tenant rent. This focuses on the real estate property itself and, so long as space is rented out in your unit, it will get you a monthly payment from all of your tenants.
Real Estate Related Income
Specialists in the real estate industry, such as real estate brokers, can make money on their investments in two different ways. They can make money from commissions on properties they’ve helped clients buy or sell, or they can earn their money from real estate management companies. With the latter, however, the companies will keep a percentage of the rent in exchange for running the day-to-day operations of the property they reside on.