Seem like everyone and their mother is “in real estate,” and wondering how to make money in real estate yourself?
You can invest in it, of course, whether directly or indirectly. A study over 145 years in more than a dozen countries found that real estate offered the highest returns of any asset class with half the risk of stocks.
Alternatively, you can choose a career that relates to real estate. There are dozens of ways to make money with real estate as a career, such as working for a real estate brokerage, title company, or property management firm.
As you explore how to make money with real estate, consider the following options as a starting point, not an exhaustive list.
Ways to Make Money in Real Estate: Direct Ownership
When most people think of real estate investing, they think of buying and owning property directly.
If you like the idea of owning property yourself, consider the following ways to make money on real estate investments.
1. House Hacking
What if you could buy a home and an investment property in one, and then live there for free?
You can, and it’s called house hacking.
In the classic house hacking strategy, you buy a multifamily property with 2-4 units, move into one unit, and rent out the others. The rents from the other units cover your monthly mortgage payment, ideally with some extra to cover maintenance, vacancy rate, and so forth. You can even use the future rents from these neighboring units to qualify for your mortgage loan.
But multifamily house hacking isn’t the only way to score free housing.
You could buy a home with an accessory dwelling unit, or add one to your existing home. Which you could then rent out to a long-term tenant, or rent out on Airbnb.
You could rent out bedrooms to housemates, like I did. Or rent out storage space in your garage, basement, or attic, like Deni did. Or rent out your entire home on Airbnb periodically, and crash with friends or family members while it’s rented. You could get really creative, and host a foreign exchange student. Deni did this, and the stipend covered most of her mortgage payment!
Read up on other creative house hacking ideas, and brainstorm some of your own while you’re at it.
2. Buy and Hold: Long-Term Rentals
You know how long-term rentals work, and have probably lived in a few yourself.
It’s the classic landlord model: you buy a property and then sign a long-term lease agreement with tenants. You have to maintain the property, collect rent, and enforce the lease agreement, which sometimes means serving eviction notices and going through the full eviction process when tenants default or otherwise violate their lease terms.
Investors typically go one of two routes when finding properties for the buy-and-hold strategy. Some buy turnkey rental properties, ready for tenants to move in, or with tenants already living there.
Other investors buy fixer-uppers and use the BRRRR strategy, where they renovate the property then refinance it with a long-term rental property mortgage. That comes with the added benefit of being able to pull your original down payment back out of the property. You can recycle the same down payment over and over again to keep building your portfolio — an example of earning infinite returns on those investments.
Neither strategy is better or worse, it just depends on whether you’d rather score a better deal in exchange for taking on the headaches of renovation.
3. Buy and Hold: Short-Term Rentals
With the advent of Airbnb, everyone now understands how short-term vacation rentals work too. You rent the property out to short-term guests, and (mostly) don’t have to worry about evicting bad tenants or chasing deadbeats down for the monthly rent.
But vacation rentals come with other risks and headaches. You have to market the property effectively and maintain a high occupancy rate, or risk losing money each month. You have to furnish and decorate the unit tastefully. And, of course, the constant turnovers add costs and labor as you clean the unit between every guest, change the linens, and so on. You can always hire a property management company to take on these headaches for you, if you invested long-distance.
If you’re interested in short-term rentals as a way to make money in real estate, start with these tips on how to be an Airbnb host.
4. Invest in Mobile Homes
Rather than single-family homes or multifamily properties, you could always buy mobile homes.
They cost a lot less, for starters. And because they’re not “sexy” investments, they often offer higher returns on investment and cap rates.
Before you write them off, listen to our interview with “The Mobile Home Gurl” Rachel Hernandez. You might just be surprised.
5. Invest in Mobile Home Parks
Alternatively, you could invest in mobile home parks, and make money from renting out pads to mobile home owners.
It costs far more to buy a mobile home park than an individual mobile home, of course. But the business model comes with plenty of perks — to begin with, you don’t have to maintain any houses!
Check out Mr. 1500’s experience owning a mobile home park for a fun and detailed case study.
6. Real Estate Wholesaling
When you wholesale real estate, you don’t actually end up buying the property — you flip the contract to buy it.
Which makes it an odd entry in a list of how to make money in real estate directly. But real estate wholesalers should be prepared to buy any property they put under contract, if they fail to find any buyers.
Real estate wholesaling works like this: you find a great deal on a property, often a fixer-upper. You put it under contract, then you turn around and find another buyer willing to pay a little more than your contract price. You assign the contract to them, earning the difference between the two prices as a margin or fee.
For example, you find a distressed seller willing to take $70,000 for a $100,000 property, in exchange for a quick sale. You put it under contract for $70,000, then offer the deal to another real estate investor for $75,000. They buy it for $75,000, a steal given its market value of $100,000, and you earn a $5,000 margin without ever having to take title to the property.
Sound too good to be true? It takes a lot of work to find deals that good, and to build a network of buyers to take these deals off your hands. And if you fail to find a buyer, you have a choice: cancel the sales contract and lose any earnest money deposit you put down or buy the property yourself.
What the #%& are real estate syndications, and do they really earn 15-30% returns?
7. Flip Houses
Everyone understands the basics of flipping houses. You buy a fixer-upper, renovate it to “force equity,” and then sell the finished property to a homebuyer.
Again, it requires the skill of finding great deals on properties. It also requires a slew of other skills, such as negotiating with contractors, managing contractors, navigating the local permit process and hassling with city inspectors, understanding which home improvements add value and which don’t, working with investment property lenders, and a strong understanding of the local real estate market.
Still, it’s a tried and true way to make money with real estate. Many investors flip houses in addition to keeping others as rentals, following the BRRRR method. Flipping keeps them capitalized with frequent payouts, while the rentals build cash flow and long-term appreciation.
Some flippers like to get their real estate license for direct access to the MLS, others don’t bother. I’d only recommend you do that if you plan to work as a real estate professional, whether as a side hustle or your main gig. Otherwise it’s just not worth the headaches of passing real estate exams, getting your license, working under a broker, and disclosing your license to every buyer and seller.
8. Invest in Land
Land comes with its own advantages, beyond not having to maintain any physical homes.
Like mobile homes and parks, land isn’t sexy, so there’s less competition. That leaves higher potential returns for investors, often over 100% on any given property.
You also don’t have to hassle with wayward tenants or hear the line “Check’s in the mail!” ever again.
If you’re interested, check out this land investing case study, then the REtipster land investing course. Seth Williams is one of the country’s top land investing teachers and investors and teaches in an easygoing, friendly style.
9. Commercial Real Estate
You can, of course, buy commercial properties, ranging from humble corner stores to towering skyscrapers.
Commercial property types include:
- Office space
- Apartment buildings (any apartment building with five or more units is classified as commercial rather than residential property)
- Retail space (shopping malls, strip malls, etc.)
- Restaurant and bar space
- Industrial space
Commercial real estate properties don’t come with the same tenant-friendly laws that residential real estate does (excepting apartment complexes). You don’t have to worry about anti-landlord laws or absurdly strict rules — if your commercial tenant defaults or breaks your lease agreement, you can reclaim your property much faster.
10. Self-Storage Facilities
While self-storage facilities count as commercial real estate, they merit their own discussion.
Self-storage units are as close to recession-proof as investments get. When a recession hits, many people downsize to save money. And what do they do with their extra stuff, that can’t fit in their new smaller home? Many people store it rather than get rid of it.
Self-storage also makes a great real estate business model because of its simplicity. The buildings are glorified garages, split into cubicles. There’s no plumbing, no basement, minimal wiring, and often no HVAC systems. That makes both construction and maintenance simple and cheap.
You can automate access to the storage units, for minimal property management headaches. Owners don’t have to hassle with lengthy, expensive evictions either. If a renter doesn’t pay, you give them notice and then remove their stuff if they still fail to pay rent.
All of which makes for a simple, straightforward real estate income model. If you like the idea of self-storage investing but don’t have the money to buy a facility on your own, consider investing in a self-storage real estate syndication (more on that shortly).
11. Fractional Property Ownership
You can of course partner with a real estate investor, in a joint venture. For instance, you find an experienced investor and offer to pitch in 20% of the purchase price for 20% ownership. You get to invest with less capital, and potentially invest passively as a silent partner.
But you have to find trustworthy partners, and negotiate the terms of your partnership. If you don’t know any real estate investors, that in itself could prove a challenge.
As an alternative way to make money with real estate, consider real estate crowdfunding platforms that offer fractional ownership. For example, you can buy fractional shares of rental properties on Ark7, Lofty, and Arrived. You can buy fractional shares in a property for $20-100 and still get the full rights and privileges of ownership, including landlord tax deductions. Several of these platforms offer short-term vacation rentals in addition to long-term rentals.
In fact, Ark7 and Lofty even offer a secondary market for buying and selling shares at any time. That means they come with full liquidity, unlike buying entire rental properties by yourself.
You collect rental income while you own the property, and get a hefty paycheck when the property sells or when you decide to sell your shares. Many passive investors find it one of the best way to make money with real estate, and certainly one of the easiest.
How to Make Money in Real Estate: Invest Indirectly
You don’t have to buy properties directly to invest in real estate.
In addition to buying properties, I also invest in real estate indirectly through most of the following strategies.
12. Real Estate Syndications
In a real estate syndication, you typically become a silent partner on a large commercial building deal.
It works like this. An expert real estate investor — the syndicator — finds a good deal on a commercial property such as an apartment building. They don’t have enough money to buy the property themselves, so they raise money from partners. The partners usually authorize the syndicator to oversee the deal and manage the property, so the syndicator makes most decisions even though they’re a minority shareholder.
In exchange for their labor, they get some sort of bonus structured into the deal.
Real estate syndications offer a (relatively) affordable way to invest in large commercial real estate deals. The minimum investment is typically around $50,000, on par with a down payment on a rental property. But the upside is high potential returns, often 15-30%+, with no labor on your part.
We invest in syndications alongside members of our Co-Investing Club. Every deal, we propose a passive group real estate investment deal, and any member who wants to invest in it can do so with as little as $5,000 — a tenth of the usual minimum.
Then we sit back, relax, and enjoy the quarterly or monthly income from distributions and the tax benefits like depreciation. We collect passive income, even as we get to show a loss on our tax returns. When the syndicator finishes renovating the property and stabilizing rents, they sell it for a huge profit.
Starting to see why I think it’s the best way to make money with real estate?
13. Publicly-Traded REITs
A real estate investment trust (REIT) is a company that either owns a real estate portfolio or lends money secured against real estate.
They trade on public stock exchanges, so you can buy and sell them instantly. That makes them liquid investments, unlike most types of real estate investments.
It also makes them volatile, and share prices correlate far too closely with stock markets for any meaningful diversification.
The greatest strength and weakness of public REITs, however, stems from how the SEC regulates them. The SEC requires them to pay out at least 90% of all profits each year to shareholders in the form of dividends. That creates high dividend yields, but it also leaves these funds with little prospect for growth, as it makes it hard for REITs to reinvest profits in new properties.
Which is precisely why I opt for private REITs over public ones.
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14. Private REITs & Funds
Some real estate crowdfunding companies offer their own pooled funds, which either own properties or debt secured against properties. But unlike publicly-traded REITs, you buy shares in these private REITs directly from the real estate crowdfunding platform.
That offers three huge advantages. First, share prices aren’t volatile, and second, they don’t correlate closely with stock markets. So they offer true diversification from your stock investments.
Third, these private funds don’t have to register with the SEC as REITs if they don’t want to, so many don’t have to pay out 90% of their profits as dividends. That leaves them the flexibility to reinvest profits and grow their portfolio, and therefore grow their share prices.
Unfortunately, because of how strictly the SEC regulates them, some crowdfunding platforms only allow accredited investors. But others do allow non-accredited investors.
My two personal favorite private REITs are Fundrise and Streitwise. Fundrise focuses more on apartment buildings and residential properties, while Streitwise buys and manages commercial office buildings. Both allow non-accredited investors, and you can start investing in Fundrise with as little as $10. Streitwise requires a higher minimum investment of $5,000 but has delivered consistently high dividends in the 6-10% range since they launched.
15. Crowdfunded Real Estate Loans
Private REITs aren’t the only way to make money with real estate crowdfunding investments.
Another model involves funding loans secured by investment properties. You put money toward a specific loan secured against a property being renovated by a flipper. When the flipper sells the property — or refinances it if they’re following the BRRRR strategy — they pay off the loan and you get your money back with interest. If the flipper defaults on the loan, the lender forecloses, and you get your money back that way.
My favorite example is Groundfloor, which allows non-accredited investors. You can invest with as little as $10, putting $10 toward each loan that you like the look of. That also makes it easy to diversify by spreading your money among many different loans.
Unlike most real estate investments, Groundfloor loans are short-term. You typically get your money back within 6-12 months, a low-commitment way to make money with real estate.
You can also invest in pooled funds that own loans secured by real estate assets. Some of these offer fast liquidity, letting you pull out your money at any time. For example, Stairs by Groundfloor and Concreit both pay 4-6% interest and you withdraw funds any time. The returns may be lower, but it’s a more flexible source of passive income than most real estate options.
16. Private Notes
No one says you have to go through a third-party loan platform to lend money to other real estate investors.
I’ve lent private notes (loans) to real estate investors I know and trust. They pay me interest quarterly, at 10% annual interest, and the loan term is open-ended.
But you can structure your loan however you want. You negotiate the interest rate, the loan term, the repayment terms. If you want, you can record a lien against the property for collateral so you can foreclose if they default.
Word to the wise, however: only lend a private note to experienced real estate investors you personally know and trust. The foreclosure process is even more expensive and time-consuming than the eviction process.
17. ETFs & Mutual Funds
Want to invest in real estate through stocks?
Some exchange-traded funds (ETFs) and mutual funds specialize in real estate or in industries with a heavy real estate component. For example, you can invest in homebuilder ETFs, or home improvement retailers like Home Depot and Lowes. For that matter, hotel and hospitality companies own plenty of real estate.
While ETFs offer great liquidity, and you can easily invest in them through your tax-sheltered retirement accounts, they tend to move in strong correlation with the stock market at large. That limits their diversification value.
18. Private Equity Funds & Opportunity Funds
Another investment to make money on real estate, you can buy into private equity funds or opportunity funds.
Private equity funds invest in, you guessed it, private companies that don’t trade on stock exchanges. These companies can include real estate businesses.
Opportunity funds invest in real estate in Qualified Opportunity Zones, typically low-income areas. Designated by the IRS, real estate in these opportunity zones offer special tax advantages. For high earners, investing in qualified opportunity funds can provide valuable tax breaks.
Unfortunately, many private equity funds and opportunity funds only allow accredited investors to participate.
How to Make Money with Real Estate as a Career
Investing isn’t the only way to make money on real estate. You can also create a lucrative career in the real estate industry.
While the career options are endless, here are a few of the more common ways to make money from real estate as a career:
- Real estate agent (commercial or residential)
- Real estate broker
- Real estate marketing specialist
- Home stager
- Real estate photographer
- Property manager (commercial or residential)
- Leasing agent (commercial or residential)
- Teach or coach new real estate agents or investors
- Sell software or tools that service real estate workers
- Real estate appraiser
- Home inspector
- Real estate attorney
- Title officer
- Settlement agent
- Mortgage loan officer or account executive
- Mortgage processor or underwriter
- Hard money lender
- Real estate deal bird dog
- Real estate developer
- Jobs with REITs
All of these career paths complement real estate investing as a side gig as well!
You can make money from real estate in countless ways. But start with the ideas above as you explore how to make money in real estate investing.
If you don’t know where to begin, try investing $10 in Fundrise or Groundfloor to start building a real estate investment portfolio. Or if you’d prefer to buy fractional shares in a rental property, invest $20 through Ark7. Just the act of creating an account and investing a few dollars will help you start down the path of making money with real estate.
You can scale up from there as you see fit, but the important part is taking the first step.♦
What do you think is the best way to make money with real estate? Why?
More Real Estate Investing Reads:
About the Author
G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.
I am interested on becoming a real estate investor. I do not know how to start but now I have an idea where to invest. This is a good read!
Thanks Jack, and glad to hear it!
I inherited a property from my parents that I would like to make rental and I am looking forward to flip houses. I think house flipping gives a lot of option increasing the revenue. I am not good at this but I am learning. Thanks to you guys!
Glad to hear you’re entering the real estate investing space Ian! Let us know how we can help!
Now that you mention it, I am looking for hard money or conventional loan to go by in case my funds run dry. I have an eye on one of the properties in the neighborhood but my fund is not enough yet since I am still busy with my parent’s house.
Check out Fund&Grow to open a bunch of unsecured business credit lines for you, and act as ongoing sources of funds.
Fantastic, thanks for the recommendation!
Buy and hold property is one of my favorites. But of course, you need to have a holding capacity!
Haha, true Peter!
i want to try investing in land. I’m no geo expert but my gut feeling tells me to try it out!
Keep us posted on how it goes Nolan!
Thanks for breaking it down to bits and pieces. I’m going to inherit properties in PA and would love to cashflow instead of selling.
Glad to hear it was helpful Xyrille!
House hacking is a great way to start investing in real estate. Generate income, build wealth, and gain valuable experience!