3 Different Ways You Can Make Money in the Real Estate Industry

words Al Woods

Real Estate Industry

Real estate is a multi-million dollar industry that is popular among investors. It’s one of the most successful investments you can make, and one of the riskiest as well. This industry is an excellent opportunity to make some extra money, and it’s open to anyone who has the means to do so.

One of the most common ways to make money in the real estate industry is by owning property. Properties almost always appreciate in value, meaning they end up being worth more than when you first bought the property. However, not every property owner plans on selling their property, and not everyone owns a property. Fortunately, there are other ways to make money in the real estate industry.

#1: Become a Real Estate Agent

The most obvious way to make money in real estate is to become a real estate agent. On average, a real estate agent in the U.S. makes around $94,000 per year and close to $7,000 per month. They earn this money through commissions paid to brokers, based on an agreed-upon percentage.

Other similar professions are real estate brokers and realtors. Brokers and realtors are also real estate agents, except that they have a little more training and/or certification than a typical real estate agent. Real estate brokers are independent real estate agents that can hire other agents/realtors. Realtors are real estate agents/brokers that are a part of the National Association of Realtors (NAR).

Real Estate Industry

#2: Flip Houses for a Profit

If D.I.Y.s and home improvement projects line up more with your passion, consider flipping homes for a profit. The term “flipping” refers to purchasing and then renovating (cosmetic changes) or remodeling (structural changes) a home that needs a lot of work and then selling it for more than what it was originally worth. Many people have become successful at flipping homes and have made a career out of it.

Just know that in order to be successful at flipping homes, you must know which renovations/remodels increase property value and which ones are allowed in certain structures in compliance with all building codes and regulations. Also be aware that unless you are a licensed contractor, you may not be able to do all of the home repairs yourself, which is an additional cost on your part. Nonetheless, it would be wise to look into and research the BRRRR Method when assessing the steps you will need to take when flipping a property in order to maximise your ROI. 

#3: Invest in Properties

Investing is the route that the majority of people choose if they don’t have the desire to flip houses or become a real estate agent. Property investment is a great way to diversify your investment portfolio because there are many different types of properties that you can invest in. Some of the most common include:

  • Residential properties (including vacation rentals)
  • Commercial properties
  • Raw land
  • Real Estate Investment Trusts (REITs), similar to mutual funds
Residential Real Estate

Residential properties are the most common types of properties that people invest in, especially first-time real estate investors. This is possible because purchasing residential properties is much more affordable than commercial properties.

Residential properties are single-family and multi-family homes that you can rent to tenants on a monthly basis. This is a great way to earn passive income, just make sure that you thoroughly screen your tenants before allowing them to rent your property.

Commercial Real Estate

Commercial real estate (office buildings, hotels, etc.) is much more expensive than residential real estate, but it’s still a good investment because you have the potential to earn more with commercial properties than you do with residential properties. This is simply due to the fact that commercial properties tend to have lower vacancy rates than residential properties.

If you’re a first-time real estate investor wanting to invest in commercial properties, look into REITs. REITs are like shares of a commercial property owned by another individual or entity with the means to invest in the property. They don’t earn you as much as you’d make investing in an actual property, but they’re still a good investment. 

Another way to get involved in real estate is to become a property manager. Technically, if you invest in any type of property you’re the property manager, but many property owners hire property managers to manage their properties for them.

There are many paths to making money in the real estate industry— you just have to choose the path that you believe will bring you the most success. Some people are savvy investors, while others are more crafty and hands-on. In whichever path you choose, there’s much to learn about the real estate industry in order to be successful.

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