In this article, I’ll share how investors profit through from owning real estate properties. Typically owners profit through one or more the following ways:
- Asset appreciation
- Rental or Lease income
- Commissions
- Water rights
- Mineral rights
- Ancillary Income
Asset Appreciation
The first why owners profit is through asset appreciation. A real estate property appreciates (goes up) in value due to several factors including:
- Demand. They are more buys than available properties on the market. This scarcity leads to price increase and appreciation.
- Construction of major infrastructure such as malls and highways near the property thus increasing its accessibility and convenience.
- Upgrade of the property with newer amenities such as a pool, covered patio, finished basement.
- An upsurge in the economic conditions of the region, turning it into a growth area.
If all the above happens then your property becomes attractive to potential buyers resulting in higher asset value.
Rental income
This is also known as cash flow income. Here, you acquire an apartment building and then lease it to one tenant or a host of tenants where you will be collecting rent at the end of every month (year). Consider renting your property as offices, rental residential houses, car washes, storage facilities etc.
Commissions for Buying and Selling Real Estate
Real estate agents keep a percentage of the money paid by the buyer they a house is purchased. For example, if an agent receives a 6% commission and her client buys a $100,000 home then she would receive $6,000 in commission
Real estate management
Real estate management firms run the day to day operations of the estate such as orientation of new tenants, collecting rent, hiring plumbers and electricians to fix faults, ensuring the neighborhood’s security etc.
In return, real estate management companies are paid a flat fee or a percentage of the rent collected, 5-10% typically.
Ancillary Income
Lastly, real estate investors generate income through ancillary services and infrastructure. These may include anything vending machines, laundry facilities, ATM’s etc.
🏠 More: Invest in a rental property – Tenants and cashflow included. See how!
