Buying and owning real estate can turn into a satisfying and lucrative business. There are several ways in which investors can make money in real estate. The first one is by becoming a landlord of a rental property. Some investors prefer flipping—buying up undervalued real estate, fixing it up, and selling it.
Damon Woodward, a high-profile investor and CEO of Leadway Holdings Ltd. and Blackcard University, combines both strategies. At the start of the year, Damon purchased more than ten properties for flipping. In addition, he also bought 67 units of real estate to renovate and hold to ensure both active income and steady cash flow. “You need the fast money and the passive money,” Damon says. “Passive income and cash flow are essential to building long-term wealth.”
In addition to these two real estate investing strategies, aspiring investors should keep in mind a few other approaches as well. Damon Woodward explains the five most profitable ways to invest in real estate.
Owning rental properties is an excellent opportunity for investors with excellent renovation skills and patience to manage tenants. This strategy provides regular income and maximizes capital through leverage. However, the strategy does require substantial capital to finance upfront maintenance costs and to cover vacant months.
A house-flipping strategy is appropriate for investors with experience in real estate valuation, renovation, and marketing. This strategy also requires capital upfront and the ability to do or ensure repairs. The greatest aspect of house flipping is that this strategy ties up capital for a shorter period and can offer quick returns. On the downside, investors who lack experience and more in-depth market knowledge are unlikely to succeed.
Real Estate Investment Groups (REIGs)
Real estate investment groups are perfect for those interested in owning rental real estate without having to run it. REIGs are small mutual funds that invest in rental properties. In general, a company buys a set of apartment blocks and allows investors to purchase them through the company. With this strategy, investors can buy multiple units, but the company will manage everything from maintenance to interviewing tenants. In exchange, the company will take a percentage of the monthly rent.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is an ideal choice for investors who want portfolio exposure to real estate without a traditional real estate transaction. A REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, like any other stock. REITs ensure regular income and allow investors to purchase nonresidential buildings, such as malls or office buildings.
Online Real Estate Platforms
Real estate investing platforms allow investors to join others in investing in a residential or commercial deal. Online platforms typically connect investors who are looking to finance projects with real estate developers. This strategy allows investors to invest in single projects or portfolios of projects. The only downside is that it can be illiquid with lock-up periods.
Are you interested in more real estate tips? Make sure to check out Damon’s social media accounts. He frequently shares excellent advice for aspiring real estate investors on his Instagram (@damonwoodward3). Damon also posts educational videos on his YouTube channel regularly.
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