Real estate investing is one of the most lucrative alternative asset classes and has resulted in thousands of people in the U.S. rising to millionaire status within a few years. While it does have its risks, it also has many rewards. Here are nine reasons real estate investing is a steady road to riches as opposed to a get rich quick promise that will likely go unfulfilled.
Ways to Earn Income by Real Estate Investing
1. Rental properties deliver ongoing passive income. Whether you buy and hold single-family residential properties or multi-family real estate, the opportunity to earn passive income can’t be beaten. Sure, there are ongoing expenses, but well-managed properties earn investors monthly dividends for as long as they own the real estate.
2. Real estate crowdfunding makes real estate investing more convenient, affordable, and accessible to more investors allowing those investors to build diversified portfolios by spreading their money around in different types of real estate investments such as commercial, industrial, rentals, fix-and-flips, and more.
3. REITs are tied to the stock market but make your investment portfolio more diversified. REITs are popular right now because they don’t require investors to actually touch the real estate they own. This investment vehicle works more like a stock, but it’s real estate. Today’s REITs are earning investors consistent double-digit returns.
4. Real estate investments can be held in a self-directed IRA with your earnings re-invested, which will save you on capital gains taxes and increase your distributed earnings exponentially over time. Even real estate crowdfunding investments can be held in a self-directed IRA.
5. 1031 exchanges are another way to keep your investment earning by compounding the benefits on top of one another. The idea is to sell a piece of real estate that you own and buy another of greater value. By doing so, you avoid paying taxes on the gains of the first piece of real estate. There are strict rules you have to follow regarding hold times, property values, and property identification, but if you follow all the rules, 1031 exchanges can propel you to greater returns.
6. Property flipping can earn you short-term profits, which you can then re-invest for greater returns. Buying a piece of real estate, improving it, and putting it back on the marketplace is a great way to earn short-term returns. Re-invest those returns into the purchase of your next property. By growing your business slowly, you can walk your way up the financial ladder of success.
7. Now, investors can use cryptocurrencies to invest in real estate. It’s risky, but it is another channel that offers diversification and security in your real estate transactions.
8. Commercial leasing offers long-term benefits and passive income, too. Unlike residential rental properties, commercial leases tend to be long-term, as in years. You can have a tenant for 10 or 20 years. Commercial office leasing is very lucrative.
9. Airbnb allows you to rent out a room of your home to travelers earning short-term profits from real estate not currently being used. You can rent out single rooms allowing you to capitalize on your own residence, a great option for empty nesters whose children have moved on and left empty rooms behind, or you can rent out entire properties for short durations. If you live near a tourist destination, this option allows you to compete with bed and breakfasts and other hospitality sector businesses without actually being in the hospitality industry. This could be a great way to earn extra income that you can reinvest in other real estate deals.
Real estate investing is getting better and the many faces of real estate crowdfunding are one reason why.