Making money in real estate is
an endless subject which includes all the various types of real
estate investments - land, apartment buildings, homes, commercial
buildings and more. Whichever type however, you'll make your
profits in some of the basic ways listed below. Why not use this
list to get yourself thinking of the possibilities?
1. Appreciation in value.
Making money in real estate can be as simple as waiting. To really
get the most appreciation, however, you should buy in an area
where demand is growing faster than the supply.
2. Depreciation write-offs.
After all the tax law changes, you still get to declare a loss
for depreciation that doesn't really exist. This can save you
a lot at tax time, meaning more after-tax profit. To maximize
your write-off, buy property with its value primarily in the
buildings, since you can't depreciate the value of land.
3. Mortgage loan pay-down.
You gain equity with every mortgage payment you make. Get the
lowest interest rate to have more of each payment go towards
the principal.
4. Cash flow. When you
buy income property properly, you have your tenants paying all
the costs and paying down the mortgage loan, and also have positive
cash flow.
5. Buy below market.
When you buy low you get instant equity that will be converted
into a profit when you sell. Offer reasons for the seller to
sell low: a fast closing, cash, assumption of debts or liabilities,
etc. Or just make a low offer. Sellers often have their own reasons
to sell cheap.
6. Sell above market. Clean it up, make it easy to buy,
and find the right buyer to get top dollar. The following four
on the list cover ways to create value, so you'll get more when
you sell.
7. Offer seller financing.
You often get substantially more for a property if you offer
financing. This is especially true if you let someone buy with
less money down. You can also get good interest on the loan,
which is another source of profit.
8. Change the use. If
there's a higher use, convert the property to make it worth more
to the next owner. This could mean making condos into apartments,
or apartments into condos. Perhaps converting a home into office
space will get the biggest return.
9. Make improvements and
repairs. Repairing things is obvious, but you need to look
creatively and carefully to find the right improvements to make.
Concentrate on those that raise the value several times more
than what they cost you.
10. Sell it in parts.
In real estate, the parts are sometimes worth more than the whole.
Splitting off an extra lot to sell for $30,000 will rarely decrease
the value of a home by that much, so you'll make more money in
the end.
Making money in real estate is
a wonderfully creative process. Try looking at the sources of
profits listed here, and thinking of ways to maximize a few of
them on your next real estate investment.
Steve Gillman has invested in
real estate for years. To learn more, and to see a photo of a
beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com
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