10 Ways You Can Make Money In Real Estate Without Investing Much
Anybody can get make money in real estate. Really? Yes. Like you, I had always thought that real estate business was an exclusive preserve of the ultra wealthy individuals.
Until a casual experience changed my views.
In 2013, I bought a small parcel of land measuring 30 x 120 sq. m. It was somewhere around Ibeju Lekki where I had hoped to put up a small bungalow to live with my family. Then, I got a disturbing call. Land around the area had appreciated. And the family who sold the land to me were at the verge of reselling it.
I have heard quite a lot of unpleasant stories about land grabbing, omonile troubles and unscrupulous land dealing in Lagos. And since I was not ready to build on it yet, I decided to sell rather than had it forcefully taken away from me.
The half plot of land I bought for N500,000 in 2013 was now selling for N2,000,000. That is 4 fold appreciation. Except perhaps, stocks, I cannot think of any other type of traditional investment that will give you a return of 300% in under 4 years.
This other article here explains why real estate is the best type of investment. Check it out!
My interest was kindled by this singular experience. I started researching the industry to find out how people really make money in real estate and this is what I found:
Opportunities in real estate are vast and there are different layers to operate in; something for every body.
While the top is reserved for the big boys with a lot of cash to spend, a lot of opportunities also exist for you who have a couple of hundreds of thousand bucks. In fact, I found that there are people who have made quite a fortune from real estate who did not start with a penny.
You will learn how in this post, continue reading.
Different ways people make money and get rich in real estate:
#1. Open Space Rental:
If you do not have the resources to develop a full property, you can start your real estate business by buying an empty land. Clear it, obtain the relevant statutory papers and rent it out. Rent it to artisans, block molders, car wash operators. Small business owners are always in nee of such spaces to rent or lease to ply their trade.
You achieve two things with this. One, you protect is to put to use, hence out of the sight of omoninles. And two, you are getting regular cash flow while the investment keep appreciating at the same time.
#2. Rental Property
It is usual and normal for anyone who earn reasonable amount of income regularly to want to build and move into his personal accommodation. Having a house of your own is a worthy goal. It takes landlord wahala off your shoulders but your cash flow may not necessarily be better simply because you live in your own property and no longer have the rent burden. A house may soon become dilapidated over time in which case the cost of maintenance may hit the roof and you will discover that that property is a liability rather than an asset.
A wise approach especially, for those at the early stages of their careers, or those who have not fully achieved financial freedom, is to invest in rental property. Your goal is to earn a higher rent from your property than you pay on your rented accommodation. The difference between you receive your own rental property and the rent for your accommodation to a landlord is a positive cash flow. This way you are building long term asset rather than of liability.
#3. Property Management
Whether it is retail, commercial or residential real estate, many companies and individuals outsource the management of their properties. The work of a property manager is wide and varied. It may include securing tenants, collecting rent on behalf of the landlord, overseeing repairs and maintenance of the property, provision of utilities, cleaning and janitorial services.
For you to do well as a property manager, you will need to organize your business as a company and reach out to owners of office complexes, shopping malls, rental apartments, terrace buildings, hostels, the list goes on. You will have to seek and partner with real estate agents and property lawyers for business referrals. With the rise in the number of shopping malls, high rise office and apartment complexes in major cities, property or facility management has become high growth subsector within the real estate industry.
#4 Real Estate Agent
Many people are familiar with this group of service providers in the real estate sector. An estate agent is primarily concerned with sourcing tenants for a rental property as well as assisting to get buyers for property owners for a commission. If at any point in time, you had rented an accommodation, you probably had dealt with an agent. Real Estate Agents, often receive between 5 – 10 percent of the amount of rent collected on behalf the property owner. This means, the higher the rent, the higher the commission you earn.
Often, estate agency and property management are used interchangeably but they are distinct business areas in the real estate industry. While the estate agent list and sell properties on behalf of the property owner, the property manager is concerned with ensuring that the property is always in good condition, is well used, secured and maintained. Well established estate agencies offer property management in their service bouquet.
#5. Property flipping
Property is a cool way to make money in real estate. It involves buying property usually at bargain prices and selling shortly afterwards at a profit. This business model work in opposite direction of a classic real estate investment principle which holds that real estate asset is held for a long term. The land flipper is a speculator. I see quite a number of people who are making a lot of money flipping property. The property can be an empty land, an uncompleted building or even a finished building.
The idea is to buy, improve if possible, hold for a little while, see price go up and then sell at a profit. The amount of profit you make will largely depend on the amount of capital available to you. The more money you have, the better you are able to take advantage of emerging opportunities.
#6 Become Property Broker
This simply describes someone who brings buyers and sellers of property together. Call it real estate marketing, you will not be wrong.
You really do not need any special skill to do this. Nor money.
But you must have good relationship with property owners. And also conduct yourself in a manner that will earn you their trust. You will need to identify and build relationship with property developers and real estate companies. That way you will always have portfolio of properties to sell.
I have come across people who have built very profitable businesses in real estate marketing or brokerage services.
#7. Property Developer
A developer gather resources from within and outside to construct a property from the scratch. Or rebuild or renovate an existing one. Then rent it or sell.
This real estate business model requires huge investment in hundreds of millions. The luxury apartments you see in Lagos, Abuja and other major cities are products of real estate developers. Also the shopping malls, large complexes and private gated estates. Individual also play in this segment, usually at the low to mid tier market. An individual can buy an existing bungalow, reconstruct or remodel it and thereafter sell.
#8. Real Estate Information Provider
If you love writing and researching, you can make money by writing focused articles, news and information on the real estate market and opportunities. People are always looking for information on bargain deals, hot developing areas, land and property for sale as well as investment opportunities. You can focus on different aspect of real estate such as home improvement tips, land acquisition, legal aspect of buying property, registration and documentation, tips on how to deal with land grabbers, family owners and a motley of other tips.
You can organize your publication in form of magazine, blogs, newsletters and online publication or ebooks. If well prepared with unique well researched unique content, money will flow through advert placement and other monetization channels.
What if you are not cut out for the rigours of business? Running around chasing potential buyers, securing contracts, developing relationship with sellers or even taking the pain to develop and manage your own property is not your idea of business. May be you are someone who prefers to invest your money and let others do the hard work, grow your money and give you regular return. You can still get rich real estate by:
You can buy shares of real estate companies quoted and traded in the stock market. You get return in the form of dividend when declared, capital gains (appreciation in share prices) and bonus shares (additional shares that companies give their shareholders in place of cash dividend).
#10. Invest in REIT
REIT stands for Real Estate Investment Trust. These are mutual funds that invest in real estates and mortgaged back securities. Many REITs are closed funds and are traded on the floors of the stock exchange which ensures liquidity for the investor.
Four REITs are currently trading at the Nigeria Stock Exchange. These include: Skye Shelter Fund, Union Homes REIT, UPDC REIT and TSL REIT.
A note of warning!
It is not all rosy. No endeavour is. Perhaps, that is why it so profitable. The higher the risk, the higher the return is a known principle of investment. In this clime, some of the risks that can make you lose your shirt include the unwholesome activities of land grabbers, local urchins (omonile in Lagos).
So to avoid stories, seek the assistance of professionals like real estate lawyers and land surveyors. And most importantly, ensure you deal with credible families and land owners.
According to Josh Atman, someone who wants to make money in real estate should follow these tips: start part time (another way of saying start small), get enough knowledge, have a master-selling skill, develop a proven strategy and keep it simple while taking measured actions.
This is to your success.
Buchi creates content and leads the Team at Stalwart Investment Partners; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.