Methods to earn profit in Real Estate
- Cash Flow – it is the extra profit earned after meeting all the expenses on the property. Say if you rent a house for $2500 and if my expenses are $2000, you make a profit of $500. If you own 10 units like this, the cash flow will be $5000 and so on.
- Property value appreciation – If you purchase worth $3, 00,000 and sell it for $4, 00,000 after one year, you earn a profit of $1, 00,000. It means you have become richer by that amount. However, it is combined with the wealth generation team members.
- Low pay down – when you mortgage your property, you pay the mortgage amount every month as per the agreement you have made with your lender. The payment consists of principal and interest. The latter is the profit for the lender, but it is the principal amount you pay every month. When the property value goes up every year, your equity increases, which separates property worth and the mortgage amount you pay monthly.
- REIT Investment – Stands for Real Estate Investment Trusts. They are purchased in stocks and mutual funds. It is the easiest way to invest in real estate as the trust takes care about the investment amount and handles the market.
- Tax Benefits – The real estate investors get tax benefits from the US government. There are many benefits you can get in real estate investment. They are:
- Whatever cash or appreciation you get into real estate is not considered as a business income.
- The income tax that is due is considered as an offset is treated as depreciation.
- When you sell rental properties, whatever profit you earn is taxable on long-term capital gains if there are any.
- The government offers you 1031 exchange which can be used as tax exemption in order to trade up with bigger and better properties.
- Vacation Rentals – If you have purchased a house at the tourist location, you can hire a property manager to help you to rent the house. You can take advantage of vacation rentals during the peak seasons.
- Short term rentals – You can go for short term rental properties out of your need or necessity. Many people invest in this and sell it when the value appreciates so as to make profits.
There are several methods to earn profits in real estate. Whatever way you want to choose in this business depends on your requirements. Fix and flip give you huge profits, provided you keep high volume deals and quickly convert it to money