how to make money real estate investing

Anyone exploring how to make money real estate investing needs to answer a single question: “What sets me apart from competing investors?” 

In other words, what’s your competitive advantage?

In any business, from a Fortune 500 corporation to successful real estate investing as an individual, you need a good answer to that question. Consider these seven ways that any real estate investor can excel and set themselves apart from the average investor down the street, without needing a massive team of marketers or a huge budget.

 

1. Become the #1 Authority on Your Local Market

After reviewing the best cities for rental properties, you’ve probably honed in on a few neighborhoods you like for investing. One competitive advantage you can wield over other investors is your local knowledge of those real estate markets.

Are there any development plans in the neighborhood? What new businesses are moving in, and when? How are rents trending? How are property prices moving? How is the supply of available housing, and sales volume? Are there any demographic shifts taking place? What industries do the residents work in? What do they earn in a given year? How are the schools? Are the schools improving, stable, or worsening? (Captain Obvious: if the latter, you have a problem.)

Some of the information above can come from research, but most of it comes from knowing people in those neighborhoods and staying in the loop. Find local business owners who are heavily involved in the community, and make friends with them. Become a regular at local cafes, bars, restaurants. You should grow to love these neighborhoods, become a fixture in them, spend as much time there as you can, get acquainted with other in-the-know people there.

Beyond staying on top of neighborhood trends, you should also understand the residents inside and out. You need to know what makes them tick; what they love, what they hate, what impresses them, what doesn’t. Maybe they love tech and will jump all over a rental property with smart home tech? Maybe parking is the biggest concern for them?

If you understand the residents, you can tweak your properties and rental listings to attract them like a siren song.

Admittedly, this advantage is harder if you’re a long-distance real estate investor

 

2. Build a Network for Off-Market Referrals

Most people hate networking. With a fiery passion.

Which is why the few people who take the time to do it well can simply clean up in any given market.

If you’ve started becoming a local neighborhood expert, you’re already halfway there. You’re already becoming friendly with local business owners and residents, as part of your push to know target neighborhoods well. Let them know you’re always on the lookout to pick up single-family homes or apartment buildings or your property type of choice — and that you can settle fast (more on that shortly).

Develop them as “bird dogs,” offering a referral fee if they pass information your way about someone who’s looking to sell.

But don’t stop there. Your business card should specifically ask for referrals for your target property profile. So should your email signature.

Join local civic organizations like the chamber of commerce and non-profits, and attend every event that you can. Introduce yourself to people. Guess what the first question they’ll ask is: “What do you do?”

You can even get to know delivery people, especially postmen/women, utility workers, etc. who work the neighborhood, asking if they’ve come across any vacant properties. You can’t be everywhere, but you can outsource your eyes and ears to everyone you meet in the neighborhood.

Successful real estate investing, like other businesses, leans heavily on your networking. 

 

3. Reach Sellers First

You want to compete with cash offers, without making the highest offer. So how can you beat other buyers to score deals?

By being the first offer.

This requires being extremely proactive, but anyone can do it. For on-market deals, you need auto-email alerts set up, for deals in your neighborhoods that meet your criteria. You need a responsive real estate agent, who can get you inside a property within an hour of you calling them. You need to be willing and able to drop what you’re doing to go walk through promising properties as soon as they’re listed, and willing and able to make same-day offers.

For off-market deals, such distressed sales, you want to be the first buyer to approach the seller. That could mean the first piece of direct mail they receive, the first phone call, the first email. To score good deals on distressed sales, check out Propstream (see our full Propstream review here). 

If you’re lucky, the seller will accept your offer before your competitors’ offers start rolling in.

But to do this, it helps to sweeten the deal by offering to settle quickly.

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4. Fast Funding & Settlement

Word to the wise: conventional mortgage lenders won’t close your deals fast enough. 

In learning how to make money real estate investing, you need to develop relationships with several investment property lenders. If one can’t close your deal quickly, you should have others on speed dial. 

It helps to have good credit as a real estate investor. Even hard money lenders feel more comfortable lending to borrowers with better credit. If your credit score isn’t above 750, start taking your credit history more seriously, and boost it up.

Business credit lines and cards can also serve as fast sources of funding. Check out Fund&Grow to help you open between $100,000 – $250,000 in unsecured credit lines (video explaining how it works here). 

You can also consider local community banks. In some cases, they can settle reasonably fast.  See if you can get them down to two weeks, by building trust and relationships with them (and possibly with a lightning-fast title company).

It should be no surprise that the recurring theme here is “relationships.” Build trust with lenders, keep your borrower profile strong with good credit and documented income, so they’ll be able to streamline your loan and settle quickly.

 

5. Renovation Expertise

Not all investors feel comfortable making updates and renovations. Other investors spend too much on them. You can beat them all by being willing and able to knock out renovation projects for less money.

Who can guess what word we’re going to use next?

You guessed it – this is all about relationships with contractors and handymen. You need reliable, talented, and affordable contractors for every specialty and every price point. Some jobs call for a quick, inexpensive handyman to go in and knock it out. Other jobs need full permits pulled and coordinating plumbers, HVAC contractors and general contractors together to move quickly and efficiently. It also doesn’t hurt to get to know the zoning board in the areas you invest in!

This takes experience and expertise, alongside relationships. If you don’t have any of those things, partner with somebody who does. You’ll learn how to make money real estate investing faster, and develop those contacts faster as well.

Hey, we never said it was easy to gain competitive advantages, only that anyone can do it. Start with an understanding of how to negotiate with contractors, and explore the BRRRR method while you’re at it. 

Bonus tip: while you’re at it, make sure to tenant-proof your rental to withstand a siege!

 

6. Rent Automation & Turnover Expertise

Making money as a landlord and rental investor means finding good tenants, collecting the rent on-time every month, and minimizing turnovers (when most rental income losses occur).

Our landlord software can help you with everything from advertising vacant rentals to tenant screening, lease agreements to reporting rents to the credit bureaus to incentivize on-time payments (which we just started offering).

Beyond thorough tenant screening and automating your rent collection, you can also become a master at filling vacant properties quickly. Having relationships with all those contractors will help — you can call the right guy (or gal) for the job, and have them spruce up the property in a few days. From there it’s a matter of marketing and showing the property.

One option is to pay a leasing agent to fill your vacant properties for you. They can advertise and show the property, but they won’t be as motivated as you are to find the absolute best tenant. It’s also a wasted opportunity to get direct feedback about what prospective renters like and don’t like about your unit.

Remember, you want to be an absolute expert on your neighborhoods, and part of that means knowing your target clientele in deep detail. Not just who they are, but what they want in a home, what they prioritize.

And hey, since you’ve become a regular around the neighborhood and know all those local business owners, there’s a good chance you’ll never even have to advertise. Often your network will refer renters to you when you tell them you have a vacant unit!

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What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

7. Explore Alternative Real Estate Niches

Everyone and their mother wants to learn how to make money real estate investing with rentals or flipping houses. They’re easy investing strategies to understand — everyone gets the basics. 

Which means you have endless competition for those investing strategies. 

Instead explore how to make money real estate investing in niche ways. For example, Deni and I invest in land, which costs little enough that we can invest without hassling with lenders or mortgage payments. Check out this land investing case study for how one newbie replaced his day job income in 18 months with land investing. 

Or how about mobile home parks? Another less-than-sexy addition to your investment portfolio, but they can offer a higher return on investment with fewer headaches.

Self-storage units offer another niche for successful real estate investing. You don’t have to worry about tenant damage to your properties, or a lengthy eviction process. People either pay the rent or they lose their storage space. 

In niches without much competition, it’s much easier to figure out how to make money real estate investing. 

 

8. Make Money on Other People’s Properties

What if you could earn positive cash flow on other people’s real estate portfolios? 

With rental arbitrage, you sign a lease agreement to rent other people’s income properties. Then you turn around and rent them out to short-term renters on Airbnb. 

It involves more work than renting to long-term tenants. You have to manage bookings, communicate with guest, set up automated check-in and check-out, and clean the units between guests. But it also doesn’t require a rental property down payment, or paying for property repairs. 

It sounds counterintuitive: learning how to make money real estate investing, without actually owning any rental units. But successful real estate investing comes down to creating maximum income streams with minimum initial investment.

 

Final Thoughts

Sure, you can invest all over town. But if you really want competitive advantages over other investors, become an expert in a few neighborhoods. Choose them carefully, because it takes a hefty investment of time to become an expert in a given neighborhood, with a broad network there.

For investors who take the time to cultivate a niche, they’ll find the rewards impressive. After all, how many other true experts are out there investing in these two or three neighborhoods? Probably very few.

Develop one or more of the competitive advantages above, and you can earn higher returns than mutual funds or real estate investment trusts (REITs) can deliver — with far less volatility and risk.

 

What techniques have you found to develop an edge in successful real estate investing? What are your tricks for how to make money real estate investing?

 

 

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.

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