5 Ways to Make Money Investing in Real Estate

I have been a real estate investor for about four years, I have snagged some jewels and lost a few.  I have bought bad deals and learned how to make money off of them.  I have flipped a few houses, but prefer to hold onto properties and rent them out.  Like I said, if you can make $100 profit per month renting out a house, why stop at just one?

With real estate, you can buy a property, slap a coat of paint on the outside and inside, fix a few things, then sell it for a profit.  This is called “flipping.”  You do have to work, and when you sell it, you get paid…so it’s still Earned income.  Plus you’ve got the capital gains taxes you will have to pay.  That is one way, the most commonly seen way of making money with real estate, it is also a way to get money for a larger property. Remember the roll-over you can do with a Form 1031 and use that money to purchase a more suitable property for rental purposes, or a home for yourself.

By renting the property, your renters are increasing your equity by paying down your mortgage.  Also, even with the current housing market, values are still increasing in a majority of states.  Plus, next year your house will be one year older, and the IRS allows a certain amount of depreciation on the house.

“Wait a minute?  It goes up in value and down in value?”

Yep.  Every year your house APPRECIATES in value while the government sees it as DEPRECIATING in values just because it’s another year older.  This depreciation is called “Phantom” depreciation, because the only place it is seen is on paper.

Five ways to make money with one real estate property:

1. Flip it
2. Rent it
3. Appreciation
4. Depreciation
5. Amortization

Now, here’s another great real estate trick.  How many of you have played Monopoly?  How do you get a red hotel?  By trading 4 green houses for 1 red hotel.  You can do that too, just not necessarily with a hotel (unless you are trading with a dumb-blonde hotel heiress.)  But if you wish to trade properties, the rules are simple, all properties involved must be Like Kind, meaning similar in fair market values.  For more on Like King Exchanges go to IRS.gov and type in Like Kind Exchange or simply download the form.

Related posts:

1. Avoid Capital Gains Taxes When Selling Your Home
2. Creative Real Estate Financing 101
3. Creative Real Estate Financing 101 - Part III - Interest
4. Creative Real Estate Financing 101 - Part II
5. Reverse Mortgages, Part IV - Estate Planning