Real Estate

Rental real estate investing can be a rewarding way to diversify your portfolio, generate passive income, and build wealth. But it’s not easy—or quick. Whether you’re an experienced real estate investor or just starting out, education is an essential part of the process. After all, the more knowledge you have, the easier it will be to develop the right skills, refine your strategy, and become profitable. And seeking advice from experts is a great way to learn. With so many real estate investing books, choosing the best ones can be difficult and time-consuming. So, we’ve done the hard work for you by evaluating dozens of books from respected industry experts. Here are the 10 best books to help you navigate your rental real estate journey—from finding properties and tenants to handling financing and taxes. Note that most of these books are available in print, ebook, and audio formats.     Best Overall: The Book on Rental Property Investing Courtesy of Amazon BUY ON AMAZON Our top overall pick was written by Brandon Turner, an active real estate investor and co-host of the BiggerPockets podcast. The back-cover blurb boasts that the book has “Every strategy, tool, tip, and technique you need to become a millionaire rental property investor!” While the book might not cover every detail about rental property investing, it is packed with enough actionable information and strategies to help you get started. This 2015 book covers all the topics you would expect in enthusiastic fashion, including keys to rental property success, building your real estate team, analyzing rental properties, financing deals, the due diligence process, closing, managing your rentals, and exit strategies—including details about 1031 exchanges. Turner also includes four sample plans to emphasize that there are multiple ways to achieve your goals.   Best for Beginners: How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started Courtesy of Amazon BUY ON AMAZON Authors Joshua Dorkin and Brandon Turner are real estate investors and co-hosts of the BiggerPockets podcast. Their 2018 book is an easy-to-read, easy-to-understand introduction to several popular investing strategies, including house flipping, wholesaling, short-term rentals, turnkey investing, BRRRR (buy, rehabilitate, rent, refinance, repeat) investing, and house hacking. The book is an ideal starting point for beginners and explains how to invest even if you have a full-time job, no money, or bad credit. It also offers tips for earning more at work (or on the side), so you can invest more. The book has lots of stories taken from the authors’ podcast. These are motivational, real-life tales that give readers an idea about what real estate investing is like—and that there’s no one right way to go about it. According to the Investopedia Financial Review Board, the book “makes investing in real estate approachable and understandable for anyone new to real estate. Even experienced real estate investors could likely round out their knowledge with this quick and informative read.”   Best for Multifamily Properties: ABCs of Real Estate Investing Courtesy of Amazon BUY ON AMAZON Author Ken McElroy has decades of experience in multifamily asset and property management and development; he’s also the real estate advisor to Robert Kiyosaki of The Rich Dad Co. Rather than offering a bird’s eye view of real estate investing, McElroy’s 2004 book focuses primarily on multifamily properties: identifying your market, setting target property parameters, evaluating potential investment opportunities, making offers, performing your due diligence, negotiating deals, and (eventually) maximizing the property’s profit potential. Like many other real estate investing books, it discusses the importance of building your team, pointing out that one of the biggest rookie mistakes is trying to do everything yourself. The recommended list of team members is daunting: According to the author, you’ll need a business team (an attorney and an accountant), a property search team (real estate broker and property manager), an offer team (attorney, lender, investors, and contractors), and “other” team members, including an insurance agent, income tax consultant, and surveyor. Still, considering that the book focuses on multifamily properties and larger deals, it makes sense that you would need a big team to get the job done.   Best for Financing Deals: The Book on Investing in Real Estate with No (and Low) Money Down Courtesy of Amazon BUY ON AMAZON One of the biggest obstacles that real estate investors face is financing. Brandon Turner’s 2020 book (in its second edition) covers multiple solutions, from the obvious to the lesser known, including Federal Housing Administration (FHA) loans, home equity lines of credit (HELOCs), partnerships, private money, hard money, seller financing, lease options, wholesaling, and syndication. Of course, investors often use multiple types of financing, and the “Creative Combinations” chapter emphasizes that you can mix and match various approaches to fit your deal or property. Like Turner’s other books, this one is easy to read and conversational. It includes real-life examples to provide inspiration and break up the educational content (a “bonus chapter” at the end of the book briefly highlights 12 more investor stories). If financing is holding you back from entering the real estate investing world, this book is worth a read, even if it just gets you thinking about creative solutions.    Best for New Landlords: The Book on Managing Rental Properties Courtesy of Amazon BUY ON AMAZON Heather and Brandon Turner’s 2015 book focuses on the management side of residential rentals, with lots of actionable advice on how to be an effective landlord. The book dives into topics like Fair Housing, advertising your vacancy, tenant screening, the application process, and lease agreements. It also tackles tenant management, finding and supervising contractors, and dealing with problems—from repairs and bounced rent checks to abandonment and eviction. The Turners emphasize that no matter how good you are at finding real estate deals, you have to manage them correctly if you want to be a successful investor. And while many investors hire property managers, this book is designed for those who want to manage their own rentals.    Best for Flippers: The Book on Flipping Houses BUY ON AMAZON Flipping properties is an attractive option for many current and future real estate investors, but this endeavor requires much more up-front knowledge than most realize. J Scott, a multifamily

A real estate consultant provides expert advice and recommendations to clients looking to purchase or develop property. Real estate consultants generally work with commercial real estate investors rather than residential buyers and sellers. They are also referred to as “real estate counselors” or “real estate advisors.” Real estate consultants typically have a real estate license and may hold a Counselors of Real Estate (CRE) designation.1 Think of real estate consultants as “behind the scenes” experts. They perform extensive research in order to help guide clients’ decision-making during every step of a project. Rather than focusing on a transaction, their job is to ensure overall investment success for the client.2 A real estate consultant typically works for a large consulting firm or as an independent consultant. Their compensation depends on the type of work they do, but most real estate consultants are paid a flat or hourly fee.3 KEY TAKEAWAYS A real estate consultant provides a variety of services to help maximize the potential return on an investment in real estate. Property developers, builders, real estate investors, and investment banks rely on real estate consultants for professional advice. There are key differences between a real estate consultant and a real estate agent. What Does a Real Estate Consultant Do? Real estate consultants guide client decisions based on extensive research and industry expertise. The first step is to have an initial meeting with the client to discuss primary and secondary objectives. When the objectives are defined, a real estate consultant formulates a plan to achieve them in the most cost-effective way. A real estate consultant’s exact role depends on the type of client with whom they work. For example, consultants working on a property development project are often hired before the land is even secured. The client relies on the real estate consultant to confirm the viability of the investment. The consultant does this by visiting the proposed job site, meeting with local real estate professionals, and analyzing market trends. Types of Real Estate Consulting Real estate consultants often specialize in working with one type of business, but some may work with a variety of clients. Here are some examples of common types of real estate consulting. Property Development Real estate consultants are hired to advise on commercial and real estate development projects from start to finish. This may involve researching potential sites for the development, conducting feasibility reports, and running competitive analyses.4 Consultants who work for developers usually have a background in sales or marketing. Developers look to consultants to provide insight into buyer trends to produce a property that is both competitive and unusual in the market.5 Some real estate consultants may also work with interior designers. Real Estate Investors Investors looking to add real estate to their portfolio may hire a real estate consultant to help manage the process. In this role, the real estate consultant conducts economic analysis to ensure the investment is a sound financial decision for the buyer.5 This may start with an analysis of the pricing, supply, and demand of the property type or location. The consultant then evaluates the marketability of the property to determine profits under current market conditions. The outcomes of this research are used to estimate the risk to the buyer and the potential return on investment. The consultant may also review property appraisals and insurance policies.3 Consulting Firms Large consulting firms offer a wide range of services to help determine the value of a development project or real estate investment. They provide real estate consulting services to real estate investment trusts (REITs), other investors, lenders, business owners, and corporate real estate groups. Real estate consultants who work for consulting firms perform due diligence, conduct market studies, and offer lease advisory and portfolio services. They also assist with real estate portfolio positioning, strategy, and financial analytics and modeling.67 Residential Clients Some real estate agents offer consulting services in addition to their normal real estate business. In this case, the consultant would help the buyer determine whether a purchase was a good investment. They will consider the buyer’s goals and look at all aspects of a potential transaction. Because they are not working for commission, the consultant is able to provide advice that is completely objective and unbiased. How Real Estate Consultants Are Paid A real estate consultant’s pay depends on the client and the type of firm with which they work. Unlike a real estate agent, who is paid on commission, a real estate consultant is paid a flat or hourly rate or paid by deliverable. They may also charge an hourly consulting fee. According to Zippia, the average real estate consultant earns about $94,000 per year, with an entry-level average of $62,000. However, this figure would likely be greater for a consultant working for a large, established firm.8 Real Estate Consultant vs. Real Estate Agent A real estate agent is a licensed professional hired to facilitate the purchase or sale of real estate. Most states require real estate agents to work through a real estate broker, who has additional training and licenses.9 A real estate agent may be a buyer’s agent, a seller’s agent, or in some cases both. A seller’s agent, also known as a listing agent, lists the property and manages the offers from prospective buyers. A buyer’s agent recommends properties to a buyer and assists with making an offer. The two agents work on behalf of their clients to finalize an offer and complete a contract. They negotiate with each other to try and secure the best deal for their clients.9 Real estate agents are not required to research or provide advice on real estate purchases. Their job is to ensure a smooth transaction for buyers and sellers. They are usually paid a commission based on a percentage of the property sale price.10 The Bottom Line Real estate consultants provide a variety of services to different types of clients. However, no matter what business they are in, clients ultimately hire a real estate consultant to ensure that they will achieve their desired return on investment.

What Is Real Estate? Real estate is defined as the land and any permanent structures, like a home, or improvements attached to the land, whether natural or man-made. Real estate is a form of real property. It differs from personal property, which is not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment. KEY TAKEAWAYS Real estate is considered real property that includes land and anything permanently attached to it or built on it, whether natural or man-made. There are five main categories of real estate which include residential, commercial, industrial, raw land, and special use. Investing in real estate includes purchasing a home, rental property, or land. Indirect investment in real estate can be made via REITs or through pooled real estate investment. Understanding Real Estate The terms land, real estate, and real property are often used interchangeably, but there are distinctions. Land refers to the earth’s surface down to the center of the earth and upward to the airspace above, including the trees, minerals, and water. The physical characteristics of land include its immobility, indestructibility, and uniqueness, where each parcel of land differs geographically. Real estate encompasses the land, plus any permanent man-made additions, such as houses and other buildings. Any additions or changes to the land that affects the property’s value are called an improvement. Once land is improved, the total capital and labor used to build the improvement represent a sizable fixed investment. Though a building can be razed, improvements like drainage, electricity, water and sewer systems tend to be permanent. Real property includes the land and additions to the land plus the rights inherent to its ownership and usage. Real Estate Agent A real estate agent is a licensed professional who arranges real estate transactions, matching buyers and sellers and acting as their representatives in negotiations. What Are Types of Real Estate? Residential real estate: Any property used for residential purposes. Examples include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences. Commercial real estate: Any property used exclusively for business purposes, such as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking facilities, restaurants, shopping centers, stores, and theaters. Industrial real estate: Any property used for manufacturing, production, distribution, storage, and research and development. Land: Includes undeveloped property, vacant land, and agricultural lands such as farms, orchards, ranches, and timberland. Special purpose: Property used by the public, such as cemeteries, government buildings, libraries, parks, places of worship, and schools. The Economics of Real Estate Real estate is a critical driver of economic growth in the U.S., and housing starts, the number of new residential construction projects in any given month, released by the U.S. Census Bureau, is a key economic indicator. The report includes building permits, housing starts, and housing completions data, for single-family homes, homes with 2-4 units, and multifamily buildings with five or more units, such as apartment complexes1 Investors and analysts keep a close eye on housing starts because the numbers can provide a general sense of economic direction. Moreover, the types of new housing starts can give clues about how the economy is developing. If housing starts indicate fewer single-family and more multifamily starts, it could signal an impending supply shortage for single-family homes, driving up home prices. The following chart shows 20 years of housing starts, from Jan. 1, 2000, to Feb. 1, 2020.2 20 years of housing starts. Source: Federal Reserve Bank of St. Louis. How to Invest in Real Estate Some of the most common ways to invest in real estate include homeownership, investment or rental properties, and house flipping. One type of real estate investor is a real estate wholesaler who contracts a home with a seller, then finds an interested party to buy it. Real estate wholesalers generally find and contract distressed properties but don’t do any renovations or additions. The earnings from investment in real estate are garnered from revenue from rent or leases, and appreciation of the real estate’s value. According to ATTOM, which oversees the nation’s premier property database, the year-end 2021 U.S. home sales report shows that home sellers nationwide realized a profit of $94,092, a 45.3%return on investment, up 45% from $64,931 in 2020, and up 71% from $55,000 two years ago.3 Real estate is dramatically affected by its location and factors such as employment rates, the local economy, crime rates, transportation facilities, school quality, municipal services, and property taxes can affect the value of the real estate. Pros Offers steady income Offers capital appreciation Diversifies portfolio Can be bought with leverage Cons Is usually illiquid Influenced by highly local factors Requires big initial capital outlay May require active management and expertise Investing in real estate indirectly is done through a real estate investment trust (REIT), a company that holds a portfolio of income-producing real estate. There are several types of REITs, including equity, mortgage, and hybrid REITs, and are classified based on how their shares are bought and sold, such as publicly-traded REITs, public non-traded REITs, and private REITs. The most popular way to invest in a REIT is to buy shares that are publicly traded on an exchange. The shares trade like any other security traded on an exchange such as stocks and makes REITs very liquid and transparent. Income from REITs is earned through dividend payments and appreciation of the shares. In addition to individual REITs, investors can trade in real estate mutual funds and real estate exchange-traded funds (ETFs). Another option for investing in real estate is via mortgage-backed securities (MBS), such as through the Vanguard Mortgage-Backed Securities ETF (VMBS), made up of federal agency-backed MBS that have minimum pools of $1 billion and minimum maturity of one year.4 or the iShares MBS ETF (MBB) which focuses on fixed-rate mortgage securities and tracks the Bloomberg U.S. MBS Index. Its holdings include bonds issued or guaranteed by government-sponsored enterprises such as Fannie Mae and Freddie Mac.5 What We Like Liquidity Diversification Steady dividends Risk-adjusted returns What We Don’t Like Low growth/low capital appreciation Not tax-advantaged Subject to market risk High fees Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of

Investing in real estate can be a success, but going it alone can be challenging and highly risky. Joint ventures, wholesaling, and property management are just a few ways investors can profit from real estate. It also takes a little savvy to become successful in this highly competitive sector. Below, we show it takes more than moxie and luck, detailing the 10 habits that highly effective real estate investors share. KEY TAKEAWAYS Real estate is a challenging business that requires knowledge, talent, organization, networking, and perseverance. Becoming knowledgeable and educated about the real estate market is crucial, but this often requires more than just in-class learning. Understanding the risks, working with an accountant, finding help, and building a network are all part of finding success as a real estate investor. While certain universities offer general coursework and disciplinary programs that can benefit real estate investors, a degree is not necessarily a prerequisite to be profitable in real estate investing. Whether an investor has a degree or not, there are certain characteristics that top real estate investors commonly possess. 1. They Are Planners Real estate investors must be business professionals to establish and achieve short- and long-term goals. A business plan is a good starting point, as it enables you to visualize the big picture and focus on what’s important, rather than any minor setbacks. Real estate investing can be complicated and demanding, and a solid plan can keep you organized and on task. The plan should include estimated outlays and inflows of cash from rentals, how many units to own, when to refurbish or upgrade units, demographic changes, and anything else that could affect your investment over time. 2. They Do Their Homework Effective real estate investors acquire in-depth knowledge of their selected markets. Keeping abreast of current trends—including any changes in consumer spending habits, mortgage rates, and the unemployment rate—prepares you to adjust to changing conditions. This enables you to predict when trends may change and create potential opportunities. But this all starts with learning about your area of the real estate market. International real estate investor and developer Doron Yacobi agrees: “If you don’t know a neighborhood like the back of your hand, you don’t know it well enough to invest in.” 3. They Develop Trust Real estate investors are usually not obligated to uphold any particular pledge of ethics. Although taking advantage of this situation would be easy, most successful real estate investors have high ethical standards. Since real estate investing involves people and requires their trust in you, your reputation will be important in any negotiations or sales prospects. Effective real estate investors know it is better to be fair than to see what they can get away with. 4. They Develop a Niche Successful investors frequently focus on a particular part of the real estate market where depth of knowledge is essential. This can take time, but once you master a particular market, you can move on to other areas using the same in-depth approach. Some niches include high-end residential, low-income multi-unit housing, or rural farm rehabs. 5. They Generate Respect Referrals generate a sizable part of a real estate investor’s business, so it is critical to earn the respect of business partners, associates, clients, renters, and anyone with whom you have a business relationship. Effective real estate investors pay attention to detail, listen and respond to complaints and concerns, and represent their business in a positive and professional manner. This builds the kind of reputation that makes others interested in working with you. 6. They Stay Up to Date As with any business, it’s imperative to stay up to date with changes in laws, regulations, terminology, and trends that form the basis of the real estate investor’s business. Investors who fall behind risk not only losing momentum in their businesses but also risk legal ramifications when laws are ignored or broken. Successful real estate investors keep up on real estate, tax, and lending laws and regulations that could directly or indirectly impact their business. 7. They Are Prudent With Risk Stock market investors are inundated with regular warnings regarding the inherent risks involved in investing and the potential for loss. Real estate investors, however, are more likely to see and hear those claiming the opposite: that it is easy to make money in real estate. Prudent real estate investors understand the risks of real estate deals and the legal implications involved and adjust their businesses to reduce those risks. “The best piece of advice is to de-risk at the beginning,” said Nicholas Liberis, partner at architecture and development firm Albo Liberis. Such a strategy means minimizing potential risks and uncertainties as much as possible before committing significant resources to a real estate project or investment. This approach involves a thorough assessment and risk mitigation at the earliest stages of the investment process. “You make money on the buy and not the sale,” Liberis said. 8. They Have an Accountant Taxes comprise a significant part of a real estate investor’s yearly expenses. Understanding current tax laws can be complicated and can take time away from the business at hand.1 Sharp real estate investors retain the services of a qualified, reputable accountant to handle the business’s books. The costs associated with hiring an accountant can be negligible compared with the savings a professional can bring to the business. “Good tax planning can be as important as the asset acquired,” Yacobi said, “while bad tax planning can sink the investment.” 9. They Seek Help Learning the real estate investing business is challenging for someone attempting to do things on their own. Effective real estate investors often attribute part of their success to others, whether it’s a mentor, lawyer, or supportive friend. Rather than risk time and money tackling a difficult problem alone, successful real estate investors know it is worth the additional costs to embrace and learn from other people’s expertise. Mortgage lending discrimination is illegal. If you think that you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps that you can take. One

Property value increases and rental income are just two ways to profit. Whether you’re curious about the investment potential of real estate or you’re simply sick of infomercials promising little-known ways to “profit from your property,” it’s worth learning, for real, how real estate creates wealth. Rather than providing obscure strategies for investing in real estate or a primer on homeownership for first-time buyers, this article will focus on how to make money through real estate. It will cover both the basic methods that haven’t changed in centuries, no matter what kind of gloss the gurus of the moment try to put on them, and specific opportunities that have arisen relatively recently. KEY TAKEAWAYS The most common way to make money in real estate is through appreciation—an increase in the property’s value that is realized when you sell. Location, development, and improvements are the primary ways that residential and commercial real estate can appreciate in value. Inflation can also play a role in increasing a property’s value over time. You can also make money in the form of income from rents for both residential and commercial properties, and companies may pay you royalties on raw land—for example, for any discoveries, such as minerals or oil. Real estate investment trusts (REITs), mortgage-backed securities (MBSs), mortgage investment corporations (MICs), and real estate investment groups (REIGs) are investment alternatives within the real estate sector. Making money in real estate can depend on many factors: market conditions that affect remodeling costs, housing prices, interest rates, rental rates, and tenant availability. Real Estate Profits from Increasing Property Value The most common way that real estate offers a profit: It appreciates—that is, it increases in value. This is achieved in different ways for different types of property, but it is only realized in one way: through selling. However, you can increase your return on investment on a property in several ways. One way—if you borrowed money to buy the property—is to refinance the loan at lower interest. This will lower your cost basis for the property, thus increasing the amount that you clear from it. Emily Roberts © Investopedia 2019 The most obvious source of appreciation for undeveloped land is, of course, developing it. As cities expand, land outside the limits becomes increasingly valuable because of the potential for it to be purchased by developers. Once developers build houses or commercial buildings, it raises that value even further. Appreciation in land can also come from discoveries of valuable minerals or other commodities—provided that the buyer holds the rights to them. An extreme example of this would be striking oil, but appreciation can also come from gravel deposits, trees, and other natural resources. When looking at residential properties, location is often the biggest factor in appreciation. As the neighborhood around a home evolves, adding transit routes, schools, shopping centers, playgrounds, and more, these changes cause the home’s value to climb. Of course, this trend can also work in reverse, with home values falling as a neighborhood decays. Home improvements can also spur appreciation. Putting in an extra bathroom, heating a garage, and remodeling a kitchen with state-of-the-art appliances are just some of the ways that a property owner may try to increase the value of a home. Commercial property gains value for the same reasons as raw land and residential real estate: location, development, and improvements. The best commercial properties are perpetually in demand. The Role of Inflation in Property Values When considering appreciation, you have to factor in the economic impact of inflation. An annual inflation rate of 10% means that your dollar can only buy about 90% of the same goods—including property—the following year. If a piece of land was worth $100,000 in 1970 and it sat dormant and undeveloped for decades, it still would be worth many times more today. Because of runaway inflation throughout the 1970s and a steady pace since, it would likely take more than $700,000 to purchase that land in 2021, assuming $100,000 was fair market value at the time.1 Thus, inflation alone can lead to appreciation in real estate, but it is a bit of a Pyrrhic victory. While you may get five times your money due to inflation when you sell, many other goods cost five times as much to buy, too, so purchasing power in your current environment is still a factor. Real Estate Profits from Income The second big way that real estate generates wealth is by providing regular payments of income. Generally referred to as rent, income from real estate can come in many forms. Raw Land Income Depending on your rights to the land, companies may pay you royalties for any discoveries or regular payments for any structures they add. For example, these include pump jacks, pipelines, gravel pits, access roads, and cell towers. Raw land also can be rented for production, usually agricultural production, and land tracts with trees may be valuable for the timber that can be periodically harvested. Residential Property Income The vast majority of residential property income comes in the form of basic rent. Your tenants pay a fixed amount per month—which will go up with inflation and demand—and you take out your costs from it, claiming the remaining portion as rental income. A desirable location is critically important to ensure that you can secure tenants easily. Commercial Property Income Commercial properties can produce income from the aforementioned sources, with basic rent again being the most common, but can also add one more in the form of option income. Many commercial tenants will pay fees for contractual options like the right of first refusal on the office next door. Tenants pay a premium to hold these options, whether they exercise them or not. Options income sometimes exists for raw land and even residential property, but they are not common. Residential Real Estate: Paths to Profits Here is a closer look at some of the many ways that you can earn income from residential properties. Buy and Hold This is one of the more traditional ways of earning income from real estate. There are a number of ways to accomplish this: You can buy a single-family home and rent it out; buy a multifamily home and live in one of the

Here’s how—from buying rental property to REITs and more. When looking for investment options, there are many choices for where to put your money. Stocks, bonds, exchange-traded funds, mutual funds, and real estate are all good investments no matter what level of experience you have; forex or cryptocurrency may be too volatile for beginning investors. Which option you choose will depend on how involved you want to be in your investment, how much money you have to start investing, and how much risk you are comfortable taking on. Buying and owning real estate is an investment strategy that can be both satisfying and lucrative. Unlike stock and bond investors, prospective real estate owners can use leverage to buy a property by paying a portion of the total cost upfront, then paying off the balance, plus interest, over time. What makes a good real estate investment? A good investment has a high chance of success, or return on your investment. If your investment involves a high level of risk, that risk should be balanced out by a high possible reward. Even if you choose investments with a high probability of success, though, that isn’t a guarantee. You shouldn’t put money into real estate—or any other investment—if you cannot afford to lose that money. Though a traditional mortgage generally requires a 20% to 25% down payment, in some cases, a 5% down payment is all it takes to purchase an entire property. This ability to control the asset the moment papers are signed emboldens both real estate flippers and landlords, who can, in turn, take out second mortgages on their homes in order to make down payments on additional properties. Here are five key ways investors can make money on real estate. KEY TAKEAWAYS Aspiring real estate owners can buy a property by using leverage, paying a portion of its total cost upfront, and paying off the balance over time. One of the primary ways in which investors can make money in real estate is to become the landlord of a rental property. People who are flippers, buying up undervalued real estate, fixing it up, and selling it, can also earn income. Real estate investment groups are a more hands-off way to make money in real estate. Real estate investment trusts (REITs) are basically dividend-paying stocks. 1. Rental Properties Owning rental properties can be a great opportunity for individuals who have do-it-yourself (DIY) renovation skills and the patience to manage tenants. Properties can be local, or there may be good out-of-state opportunities. This investing strategy does require substantial capital to finance upfront maintenance costs and to cover periods when the property is empty or when tenants do not pay their rent. Pros Provides regular income and properties can appreciate Maximizes capital through leverage Many tax-deductible associated expenses Cons Managing tenants can be tedious Potentially damage property from tenants Reduced income from potential vacancies According to U.S. Census Bureau data, the sales prices of new homes (a rough indicator for real estate values) consistently increased in value from the 1960s to 2007, before dipping during the financial crisis.1 Subsequently, sales prices resumed their ascent, even surpassing pre-crisis levels.23 The long-term effects of the coronavirus pandemic on real estate values remain to be seen. Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).4 2. Real Estate Investment Groups (REIGs) Real estate investment groups (REIGs) are ideal for people who want to own rental real estate without the hassles of running it. Investing in REIGs requires a capital cushion and access to financing. REIGs are like small mutual funds that invest in rental properties.5 In a typical real estate investment group, a company buys or builds a set of apartment blocks or condos, then allows investors to purchase them through the company, thereby joining the group. A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all of the units, handling maintenance, advertising vacancies, and interviewing tenants. In exchange for conducting these management tasks, the company takes a percentage of the monthly rent. A standard real estate investment group lease is in the investor’s name, and all of the units pool a portion of the rent to guard against vacancies. To this end, you’ll receive some income even if your unit is empty. As long as the vacancy rate for the pooled units doesn’t spike too high, there should be enough to cover costs. Pros More hands-off than owning rentals Provides income and appreciation Cons Vacancy risks Fees similar to those associated with mutual funds Susceptible to unscrupulous managers 3. House Flipping House flipping is for people with significant experience in real estate valuation, marketing, and renovation. House flipping requires capital and the ability to do, or oversee, repairs as needed. This is the proverbial “wild side” of real estate investing. Just as day trading is different from buy-and-hold investing, real estate flippers are distinct from buy-and-rent landlords. Case in point—real estate flippers often look to profitably sell the undervalued properties they buy in less than six months. Pure property flippers often don’t invest in improving properties. Therefore, the investment must already have the intrinsic value needed to turn a profit without any alterations, or they’ll eliminate the property from contention. Flippers who are unable to swiftly unload a property may find themselves in trouble because they typically don’t keep enough uncommitted cash on hand to pay the mortgage on a property over the long term. This can lead to continued, snowballing losses. There is another kind of flipper who makes money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment, and investors may only be able to take on one or two properties at a time. Pros Ties up capital for a shorter time period Can offer significant returns Cons Requires a deeper market knowledge Hot markets cooling