You might have heard that real estate can be an excellent way to make money. If you know what you’re doing, it is. But just in case you’re not familiar with the specifics, the following will explore a few of the many ways that properties you own can make you money. It’s important to note that each location is a microcosm; individual real estate markets often reflect the macro market, but there are always exceptions. For this reason, it’s vital to do your own location-specific research before making moves with profit as your motivation.
Renting out property is one of the quickest ways to earn money from your properties. One option when it comes to rentals is short-term renting situations. Things like Airbnb or Homeaway can help with that for a cut of the profits, but you can also list your accommodation for a short term on many listing sites. If you live somewhere where people like to vacation or often need to visit for work reasons, this is an excellent option for you. You can also charge a comfortable amount if you provide extras like towels and coffee in the morning.
In contrast to the above point, you can also rent out your property for longer terms. One-year leases are common, but if you’re in a university town, you might find yourself renting for single semesters as well. In some cities, month-to-month rentals are common, so it’s good to be aware of what the standard is where you are.
Some properties are well laid out for partial rentals. Perhaps you rent the basement out to people while living on the main floor. Maybe you rent out the guest house or the upstairs unit, or a single room within your home. This is a wonderful way to supplement your mortgage and possibly earn a little cash as well.
No matter which rental option you’re considering, you need to make sure that you know what the local legislation is regarding rental units. For instance, in Canada, where winter can be harsh, it’s illegal to evict a tenant in the winter months, and there are standards for how warm you need to keep properties where the meter is shared, so one heat setting applies to everyone. There are rules about how much you’re allowed to increase rent with a tenant inside the unit, as well as legal standards for health and safety. Your municipal government probably has additional restrictions, too. Renting out property involves taking on a lot of responsibility.
Buying real estate and holding onto it for some time can earn you money. This is because, in many places, the value of the real estate increases over time. If this is your primary focus, you want to spend a lot of time and effort finding properties that have a solid chance of appreciating value. The location of the property is a major factor in this. Clean, safe neighbourhoods with good schools as well as properties on large bodies of water like ocean-front and lake-front tend to be safer than some of the other options. City properties tend to appreciate a little faster, but there is, of course, always the risk that a city will die out. Think about the instances of manufacturing cities that lost all their jobs within a generation or two. Think about areas where flooding as a result of climate change has occurred. Take your time to research the local economy and developments that are underway in a particular area before purchasing any real estate for the purposes of appreciation.
Appreciation as a Result of Improvements
Of course, you can also speed up the increase in a property’s value if you know what tweaks to make to increase a home’s worth. People can make quite a lot of money flipping houses, provided they know what they’re doing. Make sure you can handle the work required or know people who can handle it for a price you find acceptable before taking on a property that needs work. You also want to learn about the types of renovations and improvements that actually increase a home’s value. Things like curbside appeal and updated kitchens with neutral designs tend to have a nice impact on price. Anything that has too much personality or requires a lot of work to maintain (like a pool) can often not improve a property’s worth enough to justify its cost of them; in some cases, they might even lower the home’s value.
You also need to have an awareness of the area or a real estate connection. It is possible to price yourself out of a given neighbourhood. If, for instance, you finish the basement of a home, but people who shop for homes in that location don’t have the income to afford the price increase that a finished basement would entail in other neighbourhoods, you could end up not earning back your initial investment. It’s a good idea to watch a neighbourhood for a while before making any assumptions about how much you can increase a home’s value.