How Do Real Estate Investors Profit?
A real estate property appreciates in value due to several factors including:
Lack of free land to build more houses as demand for housing increases. Scarcity leads to price 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.
An upsurge in the economic conditions of the region, turning it into a growth area.
If all the above happens, your property becomes attractive to potential buyers or renters and you can dictate the price.
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
This is the money made by real estate brokers who get to keep a percentage of the money paid by the buyer after they sell a property on profit.
There is also the real estate management companies who collect rent on behalf to the landlord and then get to keep a small percentage of the rent money. The real estate management firms run the day to day operations of the estate such as orientation of new tenants, hiring plumbers and electricians to fix faults, ensuring the neighborhood’s security etc.
Another way investors in the real estate industry make money is by installing ancillary profit generating infrastructure within the estate. This infrastructure may include vending machines, laundry facilities, ATM’s etc.
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