Making money in real estate is a practical and absorbing subject that explores all the profiteering techniques involved in the various types of real estate. Land, apartment buildings, homes, commercial buildings and other types of real estate are the objects of interest in this game. Whatever your inclination, below are some basics to help you roll in the moolah.
Making money in real estate can be as simple as holding on and waiting. To really get the most out of appreciation in value, you will need to buy in an area where demand of the particular property class is growing faster than the supply.
- Loan pay-down
If you purchase on a mortgage basis, you gain equity with every payment you make. The advantage lies in getting the lowest interest rate you can (some homework to do), and then more of each payment will go towards the principal.
- Positive cash flow
When you buy income property the right way, not only do you have your tenants paying all the costs and paying down the mortgage loan, but you also have positive cash flow. And that is a shot in the arm for any investor.
- Buying low
When you buy below market you get instant equity that will be converted into a profit when you sell. The useful device here is to offer the seller a reason to sell low e.g. fast closing, cash, assumption of some debts or liabilities etc., or just make a low offer. The seller may have his own reasons to sell it cheap.
- Selling high
Clean it up nice, make it easy to buy, and find the right buyer to get the highest bid. The next four on the list cover ways to create value, so you’ll get more when you sell.
- Offer financing
You can often get substantially more for a property if you offer financing. This is especially true if you let someone buy it with a little deposit. This way you can also negotiate a good amount of interest on the loan. It has been applied with huge success in Kenya in land subdivision.
- Changing user
If there is a higher or better use for the property, you can convert it to make it worth more to the next owner. For instance if you determine that converting a home into office space will get the biggest return.
- Improvements and repairs
Repairing anything that needs to be repaired is duty, but you need to look creatively and carefully to find places that need improvement. Concentrate only on those that will raise the value several times more than what they cost you.
- Selling in parts
In real estate, parts are often worth more than the whole. For example, splitting off an extra space in a plot, for sale will rarely decrease the value of a home by the equivalent of the new plot’s selling price, so you’ll make more money in the end.Making money in real estate can be an amazingly creative process. The sources of profits listed here may be what you need in your real estate investment strategy this year.
By Kilundo Mbithi
The Author is a Lead Investment Consultant at InvestorClinics.com