Investing in real estate can be lucrative, rewarding and can even induce a wild experience especially if the adrenaline pumps up during any sale and the prospect for higher returns gets brighter. But same with other forms of investment, it has inherent risks.
But let’s not dwell more into the negative aspect of real estate investing because it surely has downsides especially if the investor fails to calculate and disregard the required factors.
The focus should be in the ways to make money in real estate investing.
If done right regardless of the methods of real estate investment, the returns can outweigh any cost attached to the acquisition of the property or even in holding a form or document that will be converted into possible property ownership.
- Investing in long-term rental properties
This form of investment is as old as land ownership. The investor buys a property with a hope of turning it into a viable investment vehicle by renting it a feasible price to cover any cost attached to it.
If the rental property is acquired through mortgage, the rental income must be enough to cover the mortgage cost including maintenance and other incidental expenses such as installation of utilities and other essentials to make the property attractive in the rental market.
What makes this a good investment vehicle is that when the property is rented out, the investor can assure of positive monthly cash flow.
Again, the rental price must be enough to cover the incidental costs including tax. The profit from the rental may be enough or higher depending on the appreciation value of the property in the market.
There may be risks in rental properties when the location experiences real estate bubble and during months of non-occupancy, in which the investor may resort to pay the mortgage cost by himself and thus, accruing negative cash flow.
But the risks can be lessened if the investor decides to buy several properties as manageable with the plan to rent them out in long-term basis.
Buying several properties for rental alleviates the risks of negative cash flow especially if most of the properties have been rented out and have been occupied by good-paying tenants.
This type of investing can be a full-time work unless the investors hire the service of property managers to take care of the upkeep and finding and qualifying tenants.
- Investing by flipping properties
Flippers buy real estate below market value, with the hope of disposing it at a much a higher price for a short period of time. This kind of investing activity is akin to day trading. Investors can gain higher income from the sale and profits after all costs are considered. The return may even be greater if the investor manages to dispose the property at a much lesser period. This encourages the investor to find other properties worthy of flipping to earn from the immediate sale.
The risk here is when the property buyer holds the property for a longer period of time than planned because of the absence of ready market. Hence, it is important to buy a property under market value but with a market report that indicates potential rise in appreciation value in the location of the property.
Pure flippers don’t have to contend with improving the property. This practice lowers the risk of incurring of additional costs and expenses in holding the property.
- Investing by fix and flipping
The secondary breed of flippers takes the aesthetic aspect into mind before putting the property in the market. It is a kind of buy-fix-and-sell trading as opposed to the buy-and-sell trading of pure flippers.
In this kind of activity though, the investor must take into account the accounting aspect especially on the expenses incurred on improving the property for flipping. The investor must also consider the cost involved during the fixing period and the potential loss that can be incurred if the property stays longer than desired in the hands of the investor.
- Investing in condotel
Investing in condotel is another opportunity for real estate investors to take part in the trend of owning condominium properties and hiring the service of hotel managers to deal with the rental, maintenance, cleaning and over-all management of units.
The investors can gain from the periodic monthly income as distributed in dividends even if the units are empty for certain periods.
There is also the advantage of having the property managed by a credible management group, hence, omitting the hassle of property management.
- Making money in real estate by becoming a broker or agent
Freelance agents and brokers in the Philippines don’t necessarily have to buy a property just to earn from real estate. They make money through commission from the sale even on installment payments. Other developers provide incentives to agents and brokers when they manage to bring in reservations from the potential buyers.
- Investing in REIT’s
Real Estate Investment Trust is similar in concept in mutual fund. It can be purchased like stocks. Investors can gain from the dividends earned from the real estate investing activities of the group.
Though the return may be great, there is also the risk of lowered earnings received especially when the market goes down.
REIT’s are not popular in the Philippines among local investors but it is an option for foreign investors who want to take part in the lucrative opportunities in real estate investing in the Philippines.
But this form of investing can be a future in real estate investing in the Philippines.
- Make money through renting the property and then flipping it
This kind of investing opportunity integrates the concept of short-term leasing and flipping. But it can also be long-term upon the option of the property buyer and investor.
The investor may hire the service of a property manager with a job of renting and maintaining the property. Once the investor considers the property to be ripe in real estate market, he can opt to dispose and eventually earn from the sale.
The investor can earn from rental income and disposal of the property. And with the money gained, he can replicate the same investment style with other viable properties.
- Make money in real estate by assuming non-performing notes
An investor can assume the settlement of non-performing notes of mortgaged properties with the hope of taking ownership of the property once the original owner defaults in payment.
The investor can take advantage of discounted amount in assuming the non-performing notes. Since, the property can be obtained from foreclosure, the investor can gain from the sale of the foreclosed property at a potentially higher profit. This holds true when the property is situated in a high-priced real estate zone.
- Making money in real estate by renting out vacation rentals
Vacation rental can be a great investing opportunity. If the property is situated near the beach in a high-flocked tourism location, investors can gain from short-term rentals or even long-term when the tenant demands it.
Putting the vacation property in AirBnB or similar sites can increase the likelihood of marketability of the property and more bookings.
- Making money in real estate by being a rent or property manager
The job of a rent or property manager can be full-time or part-time. Many realtors also earn from property management aside from the earning commissions from the sale of properties.
It is also possible in this kind of endeavor to earn from subletting the properties. By renting a house or property with several rooms with a plan to rent them out to potential tenants as long as the leasehold contract allows, the renter can earn from this way and will assume the role of property manager if he or she so desires.
There are various ways and methods of earning from real estate. It requires a keen eye on seeing the opportunity when it is presented and acting on the plans in a strategic pace.
With the real estate industry booming in Cebu and in the Philippines, there are plenty of opportunities for investors to take part in the playing field and gain lucrative rewards.
