Ways of making money in real estate.

8 Ways to make money in Real Estate
1. Real Estate Agent.
2. Rental Property Investment.
3. Real Estate Property Management.
4. Flipping Real Estate.
5. Real Estate Investment Trust.
6. Real Estate CrowdFunding.
7. Real Estate Home Inspection.
8. Real Estate Appraisal.



Real Estate
Real estates are properties consisting of land or buildings with all the natural resources that are in it, such as minerals, agriculture. Real, which means that you can see it, not visual like stocks or bonds.

Types of real estate investment.

There are different ways of investing in real estate, some ways require more time and effort which makes them more of an active source of income while others require minimal or no effort once the investment kicks off. For the sake of knowledge, I will provide some ways to invest and break it down into active and passive. To fully understand the concept of real estate investment, some investors acquire knowledge by taking online courses like "The McGraw-Hill 36-Hours Real Estate Investing Course"  

Alternatively, people can undestand the principles of real estate investment by reading books such as "The Millionaire Real Estate Investor" and "Real Estate Rehab Investing Bible"

ACTIVE REAL ESTATE INVESTMENTS:

Real estate flipping,
This is when an investor buys a property, renovate, add more value and resell to make a profit. Think of it as buying distress or dilapidated house which is way below the actual resale value as compared to other houses in the area, typically referred to as the comparable. For the most part, investors will buy houses that are 40% or less than the repaired value. They will then renovate the house and make it look good for a potential buyer, then they will put it back into the market for a higher price to make a profit. Here is a scenario, the investor buys a distressed home for $50,000 then spends $10,000 for repairs and finally sells the house for $75,000 making a profit of $15,000

Real estate wholesaling.
This is when a 3rd party, the wholesaler acts like a middle person between the home seller and the potential buyers. The wholesaler is contracted with the home seller at a particular price, who now takes it to the market with an elevated price to make a profit which is the difference between the contracted price with the seller and the amount paid by the buyer.
It is similar to flipping, except that the time frame is much shorter and no repairs are made to the home. As the wholesaler never actually purchases a home, real estate wholesaling is much less risky than flipping
Wholesaling looks like this; the wholesaler has a house under contract for $80,000 that he estimates needs $10,000 in repairs but will sell for $120,000 once the repairs are made.
Networking with investors, he finds an eager buyer at $90,000. He assigns the contract to this investor, who then has a profitable fixer-upper project. The wholesaler makes a $10,000 profit without ever owning the home.


Real estate rental property. This real estate investment is considered the most passive income source, it requires initial capital and effort to purchase a property either commercial or residential from there on there will be regular cash flow. Studies show that most successful real estate investors make it big in rentals, sometimes they even invest with other people’s money or the bank’s money.

Types of rentals. Investors invest in either commercial buildings or residential. It all depends on the budget and the choice of investment. Large commercial buildings are more expensive to acquire than a residential building. Commercial buildings are like shopping malls, office complex while residentials are like apartment buildings and single-family homes.
Consideration has to be taken in choosing which rentals to invest such as property management and repairs. I think it is easier to manage a single-family home rental than apartment buildings.

Where do people buy rental properties?. The initial process is through a real estate agent who works for a real estate broker and the financial aspect is normally handled by the banks or a financial institution.

How do people make money in real estate property rental? There are 4 ways to generate wealth with rental properties
- Rental cash flow: When you rent a property to tenants, the rents are normally elevated to pay the mortgage and have some surplus. The net worth which is the difference from the rents amount paid by the tenants and the mortgage you pay to the bank is your positive cash from profit. Here is a scenario, say your monthly mortgage and all other expenses like utility bills and taxes are $1,500. Your monthly rental to a tenant is $1,900. That means your monthly cash flow gain on this particular property is $400
- Property appreciation: Properties will appreciate with time. Some appreciate more than others depending on geographical factors and others. When property appreciates it gains equity which is also capital growth, when this happens the property owner also makes money from the growth if they decide to sell.

Property appreciates in two ways:

i. Natural appreciation is when the property's value increase as the years goes by.
ii. Force appreciation, this is achieved by instantly adding value to the property through renovation.

- Mortgage payment (Amortization). When you rent a property while the tenant is paying rent automatically the mortgage or loan is gradually been paid off. After the amortization period (this is the time it takes to pay off the mortgage loan) the property becomes completely that of the owner.
- Tax savings. Another income generation way from a rental property is through tax incentives, the tax implication for rental income is way lower than an income tax. This is all due to depreciation and other factors. Income generated by an employee and income generated from a rental property is taxed differently. Say the annual cash made from a property and an employee is $60,000 annually, the employee will end up paying more income tax than the property owner. So more money in the pocket of the property owner.
Things to take into consideration and how to handle rental properties
v  Don’t rent to friends and family.
v  Try not to allow tenants to get behind with rents.
v  Try outsourcing some of the works if possible, to free time for yourself.
v  Enforce the rules in the lease or contract from day one.


PASSIVE REAL ESTATE INVESTMENTS:

Real Estate Crowdfunding
This is a way realtor developers raise money for a real estate project, not by asking one investor for a huge investment, but by reaching out to a large pool of investors who each contribute a small amount of money in return for a potential profit or reward.
Real estate crowdfunding is a loan offer by investors to realtor developers in return of interest. The investor loans money to the developers who now owe the investor. It is not like buying shares to be part owner, the investor gets paid interest on their principal invested. Traditionally, real estate developers go to the bank for funding but in this case, they come to private investors. Investing this way can be risky because there is not any form of collaterals, so make sure you know what you're doing.
Investors make money in real estate crowdfunding by charging interest on the loan given to the realtor developers


How does Real Estate Crowdfunding works?
Here is an example:
Realtor developer X wins a huge project to build a commercial shopping center, they first go to the bank for a loan to execute the project, the bank accepts based on their credit rating but request an annual interest rate of
15%, the developer thinks the bank’s rate is high and decided to try other option. They now contact a real estate crowdfunding platform which were offering a lower annual interest rate of 10%, they accepted, registered and seek the funding. The platform comprises of several investors, each investor will access the developer based on certain metrics like the net assets, credit ratings before deciding.
Based on the amount of money the developer is requesting, each investor can now decide the amount of loan to provide and agree on their interest rate


How does Investors decide which Realtor Developer to give loan?
The crowdfunding platforms provides a rating and review metrics, where each developer is rated from 1 to 5 based on their ability to pay from previous loans taken.
Investment comes with a risk, investors should do their due diligence by researching realtor developers before providing loans to mitigate the risk.


Where does Investors learn about Real Estate Crowdfunding?
Most investment venture are not thought in the university, however there are online courses like "The McGraw-Hill 36-Hours Real Estate Investing Course"  

Alternatively, they can lean the principle of crowd funding by reading books such as "The Millionaire Real Estate Investor"  and "Real Estate Rehab Investing Bible"


How does Real Estate Crowdfunding platform make money?
The platform makes money in two ways,
The investors are charged a small servicing fee to enable them loan money direct to the realtor developers participating in the platform
The realtor developers are charged a fee anytime they receive an approved loan from the platform


Risk in Real Estate Crowdfunding
Real estate crowdfunding is considered an unsecure loan which comes with some risk like any other investment.
1. Lack of liquidity: The crowdfunding platform will hold investors money for a while, some loans can take as long as 5 years, which means that investors can’t have access to their money even in a case of an emergency.
2. Insolvency: In the event the crowdfunding platform goes out of business, these loans will be transferred to third party agencies to continue the loan process and it might require more fee or collection percentage.
3. Default in payment: The loan agreement is between the lender and the peer to peer platform, when the borrower defaults in payment, there isn’t much the lender can do but to wait.

Things to take into consideration before loaning to a realtor investor
v  It is advisable to research the net worth of the realtor developer, to know their assets and liability.
v  If possible, get the investment and credit report of the developer.
v  The realtor developer’s payment history to know if they pay their loans on time.
v  Good to also know how long they have being in business.

Below are some of the website or platforms to join a real estate crowdfunding
Alpha Investing is a private platform that connects accredited and professional investors to institutional, private real estate investment opportunities. This platform is special because the investors have a direct relationship with the firm, and they are always available to speak directly about any issue.
PeerStreet. They deal mostly with residential property, they partner with other lenders and provide the platform for them to get the funding. www.peerstreet.com
RealtyMogul. They specialize in large commercial properties, they deal with both accredited and nonaccredited investors. www. realtymogul.com
Fundrise. They operate like the stock market of real estate as an alternative to stocks or bonds. They provide access to private market real estate through real estate investment trust ( REIT) and funds. www. fundrise.com
RealCrowd. They specialize in connecting investors to developers focusing on large commercial real estate. www.realcrowd.com
AlphaFlow. They operate as a diversified portfolio, instead of connecting a developer and an investor, they buy shares of crowdfunding deals, which means they invest in multiple investments just like mutual or index funds. www.alphaflow.com