Make Money From Real Estate

How Should You Make Money through Residential Real Estate

When you hear the words “real estate investing”, you most likely automatically think about buying multi-family housing units, or perhaps office or retail space. While those are tried and true investment options that work for many people, there’s also the possibility to make money in residential real estate, as well. These options range from the conventional rental situation to other choices, and we’ll explain some of the most frequently used methods below.

Choose Your Method

There are quite a few options for making money in residential real estate, but two of the most common are flipping and renting. In one, you will buy a home, fix it up and upgrade it, and then sell it for more than you paid. In the other, you’ll buy a home, make any needed repairs or upgrades, and then rent it out while maintaining ownership. Both are viable options, but for an increasing number of real estate investors, the headaches involved with being a landlord mean that going the flipping route is a better choice. Only you can make this call, though.

There are other choices, as well. For instance, if you’re able to buy a home for a low enough price, you may not need to rehab it at all. Foreclosures are good examples of this sort of purchase. You might be able to increase the equity in the home and build your investment that way, or you could use leverage to increase your return.

Choosing Your Area

The next consideration is where you’ll be buying homes. For the sake of simplicity, the rest of this article will be focused on flipping homes. You will need to decide what nation you want to purchase your properties in – international residential real estate is a very good way to improve your financial outlook, although you’ll definitely need capital to get started.

Look for a solid, upward trending national economy. In a growing economy, real estate prices will rise, but if a recession were to hit, you can expect residential real estate prices to fall as sellers scramble to entice the few remaining buyers to their properties. You’ll also want to consider other elements, such as the gross domestic product of the nation (GDP), as this has a great impact on everything from the health of the real estate market to the average annual salary of that nation’s citizens.

Areas in the Nation

Once you’ve chosen the right nation, you’ll need to consider the local areas (cities) in which you want to buy properties. You definitely want a city with high growth (or even growth potential), and that means jobs, plus considering environmental factors. Finding local employment data for international locations can be problematic, but more industrialized nations often publish these statistics through a government agency (for the US, it would be the Bureau of Labor Statistics, for instance).

It’s not enough to just research a city and make a decision based on printed statistics. You need actual knowledge of the area. It’s ideal if you can live in the area for some time so you can get to know it firsthand. Failing this, you’ll need to work with management partners that help you make an informed decision.

Next up, you need to choose the area of the city in which to invest. This will depend on a several factors. City growth is definitely one of those, but so is risk tolerance. For instance, if a city is growing rapidly, it might be a wise decision to buy in the outlying suburbs to take advantage of the soon-to-be run for the hills by would-be suburbanites. However, there’s a lot of risk in that – what happens if growth slows and the migration from the city center doesn’t materialize? Your own risk tolerance will dictate where you buy.

There are many different options when it comes to making money in residential real estate, but there’s no one size fits all solution. Define your goals, how you’ll reach them, and know your risk tolerance. Build a plan based on that information.