Real Estate Investing: 6 Ways to Make Money and Build Wealth
The real estate market is one of the most profitable markets. Real estate investing has always been a well-paid business and can have many different ways to generate income. You may come across various ways to make money in real estate, some of which are better than others. It’s important to know what you’re getting into before you start so that you can find the most profitable way for your situation.
With the explosion of reality TV shows and social media outlets, many people believe real estate investing is a “get rich quick” scheme. Any real estate investor who has been in the business for more than a few months knows that real estate investing is about long-term growth and careful planning.
Real estate investing is a surefire way to earn income, build wealth and live a dream life. But unlike popular television shows would have you believe, it’s not as simple as becoming a house flipper or real-estate mogul overnight. Real estate investing takes time and dedication to become successful.
Real estate investing in the Philippines has been an excellent idea for many people who want to earn extra income. This can be an exciting opportunity. Still, it can also be a very risky one if it’s not approached correctly. When you invest in real estate in the Philippines, consider these six ways to help you build wealth and make money.
Becoming a Landlord
First, you will need a property you want to invest in. You could find a lovely apartment building, townhouse, or commercial property that needs some work done on it.
The first option is to purchase a single-family home and rent it out, only generating income if overhead costs are low. If your tenant’s rental payment does not cover the mortgage, insurance, taxes, and maintenance, you are effectively losing money. Your monthly mortgage payment will be fixed in an ideal world while rent prices rise, increasing the amount of money you keep over time.
This is the traditional method of making money in real estate and becoming wealthy. You make money in this type of investment by leveraging long-term buy-and-hold residential rentals. People will always require a place to live, so becoming a landlord will never go out of business. If you have a property that you can rent out, it will generate a good passive income.
Real Estate Investment Trust (REIT)
Simply put, a Philippine Real Estate Investment Trust, or REIT, is a corporation that primarily owns income-producing real estate properties. A REIT company’s shares can be purchased from any local stockbroker and traded on the Philippine Stock Exchange.
Owners of multiple commercial properties form REITs by selling their shares (often publicly traded) to investors and distributing the rental income. The REIT is like a landlord, but the REIT’s owners record income after deducting the costs of operating the buildings and the REIT.
A REIT is evaluated using a unique method. REITs are the same as regular dividend-paying stocks in that they provide investors with a steady income stream. In comparison to the types mentioned above of real estate investment, REITs allow investors access to nonresidential assets, such as malls or office buildings, that are typically inaccessible to individual investors. More importantly, REITs are highly liquid because they are traded on an exchange.
In another way, you won’t need a realtor or a title transfer to cash out your investment. In practice, real estate investment trusts (REITs) are a more formalized version of a real estate investment group.
Finally, when considering REITs, investors should differentiate between equity REITs that own buildings and mortgage REITs that provide real estate financing and dabble in mortgage-backed securities (MBS). Both provide real estate exposure, but the nature of the direction differs. An equity REIT is more established because it represents real estate ownership, whereas mortgage REITs focus on the income generated by real estate mortgage financing.
Flipping Houses
Flipping is a type of real estate investment strategy in which an investor buys a property not to live in but to sell for a profit.
Investors who flip properties focus on purchasing and resale a single or group of properties. Many investors try to generate a consistent income stream by converting properties regularly. House flipping is only for extensive experience in real estate valuation, marketing, and renovation. House flipping necessitates capital and the ability to perform or supervise repairs as needed.
This real estate investing’s proverbial “wild side.” Real estate flippers are distinct from buy-and-hold investors. For example, real estate flippers frequently seek to profitably sell the undervalued properties they acquire in less than six months.
Property flippers quickly make high-return repairs to houses and then sell them. Flipping can be profitable if you know how to find properties to fix up if you have the skills to do the makeover yourself, supervise a crew to do them, and understand the underlying costs and potential value.
Flipper makes money by purchasing low-cost properties and adding value by renovating them. This can be a longer-term investment for those who can only afford one or two properties at a time.
Short Sales
A short sale happens when a financially distressed homeowner sells their property for less than the amount owed on the mortgage. Third parties purchase the property (not the bank), and all proceeds go to the lender. The lender can either forgive the remaining balance or pursue the homeowner with a deficiency judgment, requiring them to pay the lender full or part of the difference. During a short sale, a lender must legally forgive this difference in some states.
Before approving for a short sale, the lender will consider two critical factors:
- The house must be worth less than the amount owed on it. The lender will look at recent sales of comparable properties to ensure it.
- The owner must be able to demonstrate financial difficulty. They have to show that they do not have the necessary income or assets to repay the remainder of the outstanding debt.
If you want to benefit yourself from the Short Sales, these steps will help you:
- Get Financing Approved
The first step is to get approved. While obtaining preapproval before making an offer is always beneficial, it is crucial in a short sale. The lender will ensure that the new buyer can purchase the short-sale property. Examine your options after you’ve shared documentation about your income and assets.
- Find a Home
Finding a home takes time in any case, but it’s even more difficult when you’re looking for a short sale. Concentrate on preforeclosure property listings online instead of looking through all of the listings in your desired area. You can also search public records by contacting your local county court.
- Conduct your research
Gather the available information about the property before making an offer. To determine the home’s actual value, you should first look at comparable sales in the area. Real estate agents are an excellent means for determining home value. They have access to the Multiple Listing Service, which contains information on the prices of homes currently on the market.
It would be helpful to confirm that there are no other liens on the property. You can obtain this information from the seller, agent, or lender. To be safe, you should also request a title search on the property from a title company.
Identifying a short sale can be difficult, but an experienced real estate agent can assist you. They can help explain every step of the home-buying process, including locating short sales.
- Make a Proposal
Before making an offer, you must consider what the lender will think of your request based on your knowledge of local home values. You may be thinking of a short sale as a way to get a good deal on the house. But remember that the lender is still attempting to recoup as much of the remaining mortgage balance as possible – and will almost certainly have to meet investor guidelines to accept the offer. If you want your deal to be accepted, it should be close to the home’s market value.
- Close The Deal On The Property
Even after the lender has agreed to accept the short sale, you must ensure that the lender and other lienholders release the collateral. The greater the number of lienholders, the longer this process may take.
If the approval letter and documentation are in order, you should be able to close on the property, receive the keys, and prepare it for resale.
Real Estate Investment Groups
Real estate investment groups (REIGs) can benefit people who want to own rental properties but avoid the hassle of managing them. The investment of REIGs requires access to financing and a capital cushion.
REIGs are similar to small mutual funds in that they invest in rental properties. In a real estate investment group, companies buy or build apartment buildings or condos and then sell them to investors, thereby joining the group.
A single investor can have ownership of one or more living units. Still, the investment group’s company manages all units collectively, handling maintenance, advertising vacancies, and interviewing tenants. The company takes a portion of the monthly rent to perform these management tasks.
A real estate investment group (REIG) is a company that focuses its efforts and capital primarily on real estate. These investment groups may choose to buy, renovate, sell, or finance properties to maximize profits. Real estate investment groups frequently buy multi-unit properties, selling units to investors while handling property administration and maintenance.
To prevent vacancies in a real estate investment group, all of the units have a pool of rent in the investor’s name. Thereby, even if your team is empty, you will receive some income.
Buy and Hold Real Estate
Buying and holding in real estate is a long-term strategy in which an investor buys a property and keeps it for an extended period. The owner usually intends to sell it in the future but will rent it out in the meantime to help with buying and holding real estate financing.
The buy-and-hold real estate strategy is a popular investment option because of the promise of long-term gains and short-term cash flow. The property’s rental income generates short-term income that can be used to pay off the mortgage and put money in the investor’s pocket. The property value will rise over time, allowing investors to profit when the time comes to sell the property.
The ability of an investor to select the appropriate market area is a critical component of buying and holding real estate. To be successful with a buy-and-hold property, investors must identify an area with a promising rental market and property appreciation. This will help reduce the risks that could jeopardize a given investment (namely, vacancy rates or property depreciation). Before committing to one area, anyone considering buying and holding real estate should conduct a thorough market analysis.
With the cost of living rising and most people struggling to pay their bills, investing in real estate is one way to create a solid income and build wealth. You can invest in real estate in these six ways. As you see, there are many ways to make money in real estate. If you choose to invest in this space, you must be open-minded enough to accommodate different ideas and willing to learn as much as you can about the different strategies.
Investing in real estate has been a great way to make money and build wealth for many people. With the proper knowledge, skills, and tools, anyone can begin investing in real estate. When learning more about investing in property, create a plan for your current needs.
If you want to start making money and building wealth with real estate, you need to get educated. Real estate offers many opportunities to build wealth and earn income. By working hard and using the right resources, you will learn to invest in real estate like the pros. So, go ahead and start your investment and learn from your own experiences with time.
