Making Money in Real Estate: It’s Not So Impossible After All

Making money in real estate is not some mysterious process that only a select few people know about. In fact, you’re more likely to notice. Every day the value of all kinds of properties goes up. Home prices come and go, but in general, land values ​​and property values ​​will gradually increase over time. A few years of record low mortgage rates have made home ownership possible for people who couldn’t afford it before. Thus, as demand has increased, existing home prices have gone up, broadly speaking gradually, not referring to the past few years of bubble bursting. Despite the recent rise in foreclosures, in some areas it is still a seller’s market.

Simple factors, like renters realizing it’s wasteful to pay the same amount of rent that a mortgage payment would cost them, means more people are considering homeownership. With interest rates staying low and the economy recovering from the recent recession, the need for housing is increasing, and that means prices will eventually rise; Accurately predicting market trends is key. All of which points to serious opportunities to make money in real estate.

Maybe you’re still not sure about making money in real estate, so keep these two things in mind: you can’t build new land and the population grows every year.

First, there is a finite amount of land on earth, the opportunities to develop new land are dwindling. Since the amount of land available is finite, that means the price of land and the houses that sit on it must rise. Second, the population increases by 1% to 2% each year. It is true that some areas are seeing a drop in population due to people moving to other areas, and these other areas that they are moving to are seeing an increase of up to 10%. That means great earning potential in those areas!

Making money in real estate is certainly attractive, but there are risks involved. Like any investment, such as gold or stocks, there is a chance of seeing a major loss. It could be argued that the only safe investment is government bonds. However, the rate of return on these is so small that it’s hardly worth it. While certain areas are seeing home prices rise 15% or more each year, comparing that to 4% per year for risk-free bonds is like comparing apples to oranges.

The mantra of all investment opportunities is “buy low and sell high.” Measuring trends in gold prices or stock prices is imprecise and difficult. Making money in real estate is simple by comparison. By keeping an eye on predictions for mortgage rates, growth in the economy, and local unemployment rates, you can easily predict what the market will look like.

Earning money in real estate can be done with two basic plans. The first plan is to “buy and hold.” That is, you simply buy a property and keep it to allow the value to rise naturally. In the meantime, you rent the house to cover maintenance costs and mortgage payments, as well as taxes, utilities, and preferably provide a small amount of income. The difficulty here is that if there is a sudden drop in demand for housing, such as an increase in interest rates or the prediction of heavy layoffs in the near future, property values ​​will likely drop. That means the average rental rates for that area will also drop, so you’ll have to cut back on what you charge tenants. Suddenly you have lost your income and earnings.

The other option for making money in real estate is called “flipping.” Ideally, this means you buy a property below market value, invest money in repairs and improvements to the property, and immediately sell it for more, pocketing the proceeds. The riskiest time is while you own the property, so the shorter the time between buying and selling, the better for you. This continues to be a popular real estate investment plan across the country. When done right, treated like serious business, and run by a careful and observant management team, it can mean a lot of money for the investor.