Methods of Making Money in Real Estate

Making money in real estate can be a wonderfully creative process. Just look at the sources of profits listed here, and think of how you can maximize a few of them on your next real estate investment. These ways :

• Loan pay-down: You gain equity with every payment you make. Get the lowest interest rate you can and more of each payment will go towards the principal.

• Buy low and Sell High: When you buy below market you get instant equity that will be converted into a profit when you sell. Offer a reason for the seller to sell low: fast closing, cash, assume some debts or liabilities, etc. Or just make a low offer. The seller may have his own reasons to sell it cheap. Clean it up nice, make it easy to buy, and find the right buyer to get top dollar. The next four on the list cover ways to create value, so you'll get more when you sell.

• Wholesaling: It is the process of locating distressed properties and selling to wholesale buyers.

• Owner financing: Purchasing houses from owners that will allow you to take over payments.

• Sell in parts: In real estate, the parts are often worth more than the whole. For example, 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.

• Lease option: Also known as rent to own, is a method of selling houses that investors use in flat or rising markets to make a profit.

• Change use: If there is a higher use for the property, you can convert it to make it worth more to the next owner. Sometimes this means making condos into apartments, or apartments into condos. Maybe converting a home into office space will get the biggest return.

• Retailing: It is the business of selling houses at market value. It goes hand in hand with purchasing properties at wholesale and rehabbing for resale for profits.

• Appreciation & Depreciation: Making money in real estate can be as simple as holding on and waiting. To really get the most appreciation in value, however, you should buy in an area where demand is growing faster than the supply. Remember that after all the tax law changes, you still get to declare a loss for depreciation that doesn't really exist. That can save you a lot at tax time, meaning more after-tax profit. To maximize this, buy property that has its value primarily in the buildings, because you can't depreciate the value of land.