Since the boom in the late 2000s, not a lot has been said about property prices. They shot up dramatically compared to their historical average from around 1995, but then they soon fell back down, following the crash of 2008 and 2009.
Since then, however, prices have been creeping back up again. In fact, in 2016, house prices were at their second highest level ever, compared to the historical average, just behind the peak we saw in 2007. People who stayed in the market are now seeing the rewards, making fantastic money in the process.
There are many ways to make money with real estate according to the Huffington Post. Here’s just a few of them.
Rent Smaller Units
One of the strangest things about the property market is that it’s possible to make more money out of a house or apartment, just by splitting it up into several units. A three bedroom house meant for a family of four can be divided up for three young professionals who can be charged more in total than a family sharing the property.
Finding apartments for sale that are undervalued is an excellent way to generate additional income in the property market. But it all depends on where you buy the property. Buying in an area that is on the decline, like Detroit, is probably a bad idea. But finding an apartment for sale in a city like San Francisco where the economy is booming means that there’s a higher chance that the price of the property will rise in the future.
Leverage Your Returns
Say for example you have to put 20 percent down on a property. Well, the cool thing about that is that you get to keep rental income based on 100 percent of the property’s value. Let’s say that the property you rent is worth $100,000 and that you can charge $750 a month rent. Well, if the mortgage is only $500, then you’re making $250 gross profit every month. That equates to $3,000 a year, or around 15 percent of your initial investment. Now that’s not bad, compared to what you’d get if you just put the money in the bank or in the stock market.
Profit From Lump Sum On A Refinance
Let’s say that you bought your property for $100,000 and put $10,000 into making various improvements paid for by tenant rents. And let’s suppose that those improvements mean that the property is now worth $125,000. This means that you can refinance the home based on the higher value and net $25,000 dollars in additional cash. That $25,000 can then be put towards you next property where you can again generate a $3,000 a year income.
Increase Your Equity
Another tactic you can use is to plow rental income back into increasing your equity in the property you own. Many landlords start off by paying a 20 percent deposit on an apartment or a house and then use subsequent rental income to build their equity. This additional capital can then be earned back when the house is sold.