3 Ways To Make Money In Real Estate
Let's talk about the three most common ways to make money with real estate as an investment!
#1. CASH FLOW
Cash flow is what a lot of people think about when they think about real estate has an investment.
What Is Cash Flow?
The amount of money that you're getting for rental income minus your expenses equals your total cash flow.
How Does It Work?
Example:
Rental Income: $2,000
Mortgage Payment: $1,000
Taxes: $100
Strata Fees $100
Utilities: $100
Your total expenses are now $1,300.
To sort out the calculation see below:
$2,000 of rental income - $1,300 of expenses = $700 of cash flow.
#2. APPRECIATION
What Is Appreciation?
Appreciation is the increase of your property value based on external factors such as market conditions and when you purchased.
You want to be clear about the neighbourhood you're buying in, the type of property you're looking at. Look at the history and statistics of the property to understand what percentage of appreciation you could be looking at. We always recommend being conservative, but it is a tried and true way that over the long term, you can gain more money in real estate.
#3. PRINCIPAL PAYDOWN
What Is Principal Pay Down?
Principal pay down is having someone else in your rental property, paying off your mortgage by paying rent. Even if you're breaking even, you're making money because that person is paying off your mortgage. This opens up the amount of equity, increasing your net worth on that property.
BONUS #4. SWEAT EQUITY
What Is Sweat Equity?
Sweat equity is the ability to walk into a property to do some improvements and increase the value. It could be an overhaul, it could be or interior design. That sweat equity is something that should not be overlooked and should be considered when looking at analyzing real estate properties as an investment.
Good luck on your investing journey!
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