10 Ways To Make Money With Real Estate

There are many ways to make money with real estate. People often think you need a large lump sum of capital or need to get these special degrees to make money in real estate. Although you should study and perfect your niche these assumptions are usually not the case. Here are 10 ways you can make money in Real Estate.

1. As A Real Estate Agent

Being a real estate agent, you are either a buyer agent showing the buyers the properties or you’re a listing agent, listing the property for sale on the market. As a buyer agent, you will make 2.5% of the sale price. The listing agent of the property also receives 2.5%. Seller agrees to list with the listing agent by paying the agents 5%. From that 5%, it is split in the middle for both the buyer agent and the listing agent. In a bad market, you can entice buyer agents to come and see your listing by offering more of a percentage.

2. Referrals

Send Referrals to other agents that you know. For example, I had a friend looking for a home in San Francisco, I live in the South Bay. South Bay to San Francisco is about an hour’s drive. Instead of spending time to drive up to San Francisco (which I do not know that well) and pull up a random list of properties my friend might like and drive around for weeks and weeks till he decides on a property he wants to buy, instead I connected him with a friend of mine who specializes in the San Francisco area. By doing this I received a referral fee of 25% of her commission which is typically the going rate. On a 1-million-dollar property that is 25% of the 2.5% That’s $6,250 for doing no actual work and just referring the client.

3. Wholesaling

Wholesaling is when you go directly to a seller and get the property under contract with a small deposit. At this point you have something called equitable right, it’s up to you to decide what you want to do with that contract. You can decide to purchase the property, or you can sell the right to close on that property at a certain price. What this means is that you can sell the contract to someone for a “wholesale fee” and they will purchase the property at that price.

For example, imagine I found a property for a million dollars when its actually worth 2 million dollars, I get in under contract for a million dollars and now sell that contract to an investor for 1.1 million dollars. $100K is my wholesale fee while the buyer is still purchasing the property for a good price…. That’s wholesaling in a nutshell for you.

4. Flipping A Home Or Doing A Double Close

What this means is that you actually close on the property, this is not a wholesale assignment. You close on the property, you do whatever work is needed for the property whether you are just cleaning the property, painting and changing a few fixtures or you are doing a full remodel rehab. Then you sell and close on the property. This is called flipping a property.

5. Renting Out The House

In this case, you purchase the property, get it ready to be rented and rent the property. Your rent should cover your mortgage on the property, management fees and miscellaneous expenses like, taxes, insurance and all the little things that come up like…repairs. Renting out a home is the most passive investment you can have because after you rent the home you are constantly getting a rent check every single month like clockwork.

6. Selling Courses Or Selling Your Knowledge

There is a lot of knowledge out there that people know how to do. If you can make 7 figures by taking this one course that cost you $1000, I think it’s worth it. There are several programs out there that are worth your time and your money especially those that are more technical and have that secret ingredient that you wouldn’t have known if you were doing it on your own.

7. Notes Investing (Lending Money)

When you lend money to someone, usually the money is tied up in the real estate as either a first position (like a mortgage) or a second position (like a gap funder). The person purchasing the property will borrow the money from you and pay you a certain amount as principle and interest back depending on negotiations. You could even get paid money for originating the loan and writing it up. In the worst case that they can’t perform, then you foreclose on the property and you get your money back.

8. Syndication

Syndication is when you have a pool of investors who all put their money in as equity partners to produce a large commercial property. For a 10-million-dollar project you need at least 3 million dollars but, most people don’t have 3 million dollars just sitting around in their bank account or they don’t want to put in 3 million dollars all into one deal. Instead, you get a bunch of investors all putting at least $50,000 each into a giant pool that collectively has 3 million dollars to buy this 10-million-dollar project. You can make money 2 ways in this deal. You can be the general operator or general partner, in this case, you find the deal, operate the deal and when it comes time to sell the deal for a big profit you manage on the finances, etc.

Typically, this person gets about 20-30% of the equity because they are doing all the work. The other 70% are passive investors. If you are a busy attorney, doctor or any busy businessperson and want your money to work for you without doing the actual work, this would be an option. You cut the check and let the other person do all the work. You receive a monthly check and when they sell the property or refinance the property, at this time you get your money back with interest.

9. Airbnb Arbitrage

This is when you go to someone that normally rents their house out and tell them you want to rent their property a little bit above market rate through AirBNB. You show them you have the money and know what you are doing. Some landlords will say no and others will say yes. For the landlords that do, you furnish the property, dress it up ready for AirBNB and rent it out for a daily rate. You get a few of these and you can make a good living on this.

10. Subject To Wraps

A subject to wrap is when you take over someone’s property but instead of purchasing it outright from them and getting a new loan etc. You just take over their mortgage payments. For whatever reason, the people might be in their own financial struggles and cannot make their mortgage payments. In this case you will take over the payments, they are no longer in the picture. In the “wrap” part is where you get someone else who may not necessarily qualify for a loan may be due to their credit and you have them pay you a down payment, more than what you paid the owner of course, and have them make the monthly payments to you and these monthly payments should also be more than your monthly obligations.

Brad Smotherman gave a great example of how to make money with Subject To wraps.

Bottom Line

Making money in real estate can be challenging, but there are different avenues you can pursue as shown in these “10 ways you can make money in real estate” that do not rely on the traditional ways of being a real estate agent. This is only the beginning.