Real estate investing can be a great way to build wealth over the long term, but it’s important to understand that it takes time for investments to pay off. From rental properties and flipping houses to wholesaling and hard money lending, there are many different ways that you can make money in real estate. Each strategy carries its own risks, so it’s essential to do your research before getting started. In this article, we’ll look at how long each method typically takes for investors to start seeing returns on their investment, as well as tips on how you can maximize your profits while minimizing losses. We contacted 3 of the largest real estate firms (Keller Wiliams, Berkshire Hathaway Homeservices and Exp Realty) and asked them what are the secrets to getting filthy rich with real estate! Let’s get started!
How Long Does It Take To Make Money In Real Estate?
Renting
There are a few main ways to make money in real estate, one is to buy, renovate and then rent the property out, this builds wealth over time, with recurring monthly income returns until you decide to want to sell the property, many realtors simply add to their portfolio of rental properties, each time you add another property, your monthly recurring income increases, this is a very good long term strategy, whilst also using the banks funds as leverage, very sustainable as long as interest rates are at a reasonable amount, this strategy of wealth generation can be slow and steady or also as fast as you’re able to scale.
Downside To Using The Rental Strategy
The main downside to the rental strategy is finding quality tenants and managing the property and maintenance, when something goes wrong it can be a costly hassle trying to sort out and you may have expenses which are not covered by your rent, however there are also solutions such as Property Manger Software or Hiring a property manager to consider as you will eventually have a large portfolio of sites that will require a lot of admin work.
Flipping Houses
This is a great way to make quick money but it does come with a lot of risks and you need to have the cash upfront, so if you don’t have the funds then this might not be for you. Generally speaking flipping houses takes around 6 months from start to finish, you will need to purchase the property below market value and invest in renovations or cosmetic improvements to increase the value of the property, then you can quickly turn it around for a profit. It’s important to do your research and make sure that you have done all the proper due diligence so you know what price range you should be looking at when buying and selling properties.
Downside to Using The Flipping Strategy
The main downside to using the flipping strategy is that it requires a lot of upfront capital for the purchase as well as renovations, so you could easily find yourself in a situation where you are unable to sell the home quickly enough and you have invested more money than you can get back from the sale. It’s important to make sure that there is an exit strategy in place before you commit to the purchase, or emergency funding to tie you over until a sale happens.
Wholesaling
This is a great way to get your feet wet in real estate without needing much cash out of pocket, you would need to secure the property under contract and then look for a buyer and assign the rights of the property over to them, this can happen within days or weeks depending on how quickly you are able to locate a buyer. The downside is that you may not make as much money as other strategies since you are not taking possession of the property yourself.
Downside To Using The Wholesaling Strategy
The main downside is that it can be difficult to find buyers if your properties are in an area where there isn’t a lot of interest from investors. You also need to have some knowledge about local market trends and be able to use your negotiation skills in order to get the best price for your properties.
Hard Money Lending
This is a great way to make an income with real estate and you can do it from the comfort of your own home, all you need is some start-up capital and then you can loan out money against real estate projects, charging interest along the way. Generally speaking hard money lending takes around 6 months or less depending on how quickly you are able to source deals and structure them correctly.
Downsides Of Hard Money Lending
The main downside of using hard money lending as a strategy is that it can be risky if the borrower defaults on their payments, you could end up losing most or all of your investment.
How Much Money Do You Need To Start In Real Estate?
The amount of money you need to start investing in real estate will depend on the strategy you are using and how much risk you are comfortable taking, some strategies like flipping houses require a lot up front capital and can be risky without proper due diligence, while other strategies such as hard money lending or wholesaling require less upfront capital but still come with risks.
What Do The Large Real Estate Firms Say?
As we mentioned, we contacted 3 major players in the real estate industry and here are some tips they told us!
1. Do your due diligence: Before investing in any real estate strategy, make sure to do your research and understand the risks involved.
2. Find a mentor: Network with people who have experience in the field you are interested in and build relationships with them. They can give you advice on what strategies are best for you and help guide you along the way.
3. Invest for the long term: Real estate investments take time to pay off but can be incredibly rewarding over the long term if done correctly.
4. Don’t forget about taxes: Make sure to factor any tax implications into your investment plan or you could end up paying too much at the end of the year!
5. Educate yourself regularly: The real estate market is constantly changing, so make sure to stay up to date with the latest trends and regulations.
Conclusion
Real estate investing is an excellent way to build wealth over time, but it does take time for investments to pay off. It’s important to do your research and understand the different strategies available so that you can choose one that suits your needs, timeframe and risk appetite. Be sure to also consider the potential risks associated with each strategy so that you can maximize profits while minimizing losses. With the right education and advice, you can be on your way to building a successful real estate portfolio in no time. you just need a level head and be motivated and be able to organize, manage a team.