How to Earn Money Through Property Investment
When it comes to earning money, real estate is a viable investment option that is not only least risky but can also fetch heavy profits for investors. But there are only a handful of methods to earn money through real estate. The following article will allow you to understand how to successfully generate money from a good real estate investment.
There are three main scenarios wherein investors can make money from real estate –
1. A rise in the value of the real estate
The savviest of businessmen who have invested in property can reap profits by taking advantage of a certain situation wherein the rate of inflation is expected to surpass the present rate of long term debt. In such cases, people can take calculated risks by taking home loan to finance the acquisition, purchasing real estate and then waiting for the inflation to rise. This way, they can also pay off mortgages with the money. Such a move signifies a transfer to debtors from savers.
2. Through monthly rental income by renting out the real estate to tenants
There is no rocket science to this and earning money in the form of rent is as simple as playing the game of Monopoly. Once you acquire a property, be it an apartment, villa, office space, retail space or a hotel, you can put up the property (or part of it) on lease where the tenants are free to use it in exchange for a fixed amount of monthly rent.
Property owners can make use of a simple tool to help better evaluate the process of making money from real estate. This special financial ratio is called capitalization rate or cap rate. If your real estate garners $100,000 per annum and can be sold for $1,000,000, you can mathematically divide the $100,000 earnings with the $1,000,000 price tag and receive 10 per cent, or 0.1. This implies that the capitalization rate of the real estate is 10 per cent and you are likely to earn about 10 per cent on your investment if you funded the real estate deal in complete cash, without any debt.
3. Profits amassed from business activity in the property
Another way of earning money from property investments entails business activities and special services. For instance, if you own a property like a resort, you can offer on-demand movies to the guests and earn extra money. If you possess office space in a building you can earn dough from the vending machines and in case you are the owner of the entire building, the proceeds from the parking garages will come to you.
Such types of investments will require know-how of special sub-specialties. You can hail from a particular industry and professionally grow to buy property and use it to expand your services in your original field of work.
There may be other ways to earn money from real estate but the above mentioned ways constitute majority of activities that lead to revenue generation from investment in the real estate sector.
Author bio: The given article has been written by Devika Arora, an avid writer who believes in presenting facts related to the field of real estate. Through this article, she has explored the how real estate investors can earn money using their property.