Thursday, August 6, 2009

10 Ways to Make Money in Real Estate

There are 10 basic ways of making money in a real estate investment. If you are interested in pursuing a real estate investment opportunity, it is necessary that you get acquainted with these possibilities so that you can better evaluate your position.

1. Property Appreciation. You can simply buy real estate property and wait until the right buyer offer comes along with an offer that is profitable to you. To realize the highest possible property appreciation value, you should buy a property in an area that has a projected demand growth higher than the supply availability.

2. Property Depreciation. To maximize after-tax profits and benefit more from declaring a loss for depreciation, buy a property that has its primary assessed value in the buildings and structures because the value of land does not depreciate.

3. Equity. You normally increase your equity with every payment you make. In applying for a loan, make sure to get the lowest interest rate that you can so that a bigger amount of your monthly amortization go towards the amount of the principal.

4. Cash Flow. If you buy rental property the right way, you can have your tenants paying for all the operation and maintenance costs including the mortgage loan and still have enough left over to realize a positive cash flow.

5. Buy Low. Always buy below the market to get instant equity that can be converted into a profit when you sell (some people buy at 20 to 30% below market prices). Negotiation skills are the key to buy low as you have to convince the seller to sell lower than the market for any number of advantages like fast closing, cash payment, and assumption of some debts or liabilities.

6. Sell High. Get the property ready for the market, make it look good with basic cosmetic maintenance (paints, carpet replacements, etc) and easy to buy and find the right buyer to get the best offer.

7. Offer Financing Assistance. Sellers often get significantly more money for a property if they offer financing assistance. You can agree to the buyer to make a lower down payment so that you can get more proceeds from the loan package.

8. Change Use. You can convert the use of the property to make it worth more to the prospective buyer. This may mean turning condominium units into apartments or vice versa or a home into a commercial office space.

9. Repair and Renovate. Repair all that needs repairing or replacement and make improvements to raise the monetary value and visual appeal of the property.

10. Sell in Parts. If you have a tract of land or a relatively big lot area for a home, you may want to divide the land and sell off the excess land for a profit.

There are yet other creative ways to make money in real estate; the key is in not allowing yourself to be boxed in by your property holdings but in being creative in coming up with ideas on how to maximize and realize the money making potentials of your real estate investment.

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