How Much Do Real Estate Investors Make?
In this article, I'll cover the details of how much you can make as a real estate investor. I'll also provide information on the mechanics of make money with real estate and choosing it as a career.
People will enter the world of real estate investing for many reasons. But there is no denying the fact that the main reason is financial freedom. No one will go to all the stress and risk of investing in real estate if the promise of returns was not worth it. This article will be focusing on active investors, as opposed to someone who owns a single property and rents it out.
So how much money can you make by becoming a real estate investor? And what do they even do? These questions and more will be answered. And you will have a better understanding of what it means to be a real estate investor, and how much money can be made.
Table of Contents
What is a Real Estate Investor?
You may think that being a real estate investor is simply being a landlord. But there is much more involved than simply owning a house and collecting rental income. A simplified description is that a real estate investor is someone who owns real estate and makes an income from it.
Nerd Wallet describes a real estate investor as more than someone who rents out a property and attends to their tenants every beck and call. Rather it is someone who invests their money wisely by diversifying an investment portfolio to include residential, commercial, and large-scale real estate.
Is Being a Real Estate Investor a Career?
Real estate investing is certainly a full-time career for many people, and if done correctly, can be an extremely rewarding and prosperous one. It is fair to say that becoming a real estate investor is not necessarily a straightforward path. You cannot simply find an advertisement in a job seeker website and apply. Investing is something that needs to start small and be built from the ground up. Most successful real estate investors will tell you that it can often start awfully slow, and that they will be able to name people who have tried and failed.
Do not let this deter you. If you are wanting to become a real estate investor, it is good to know that it is a valid career choice. It can also be a side hustle and be done successfully as secondary to an existing career. It really just depends on how much you invest in, and how complex the investments are.
How Do Real Estate Investors Make Money?
The answer to this question may seem obvious. They make money by investing in real estate. However, there are so many types of real estate, and therefore many types of real estate investing. Each individual investor is likely earning money is a slightly different way, but the premise will be similar. They invest their money in some form of real estate and earn passive income from rental returns or dividends.
Some of the main ways that real estate investors will earn money include the following:
- Renting (leasing) out individual properties to individual people (families) and earning money from rental income. This is where many people start, buy purchasing a house in the suburbs and renting it out to someone.
- Renting out a room or part of a property that you occupy. This is called house hacking and is a good way to help pay for an existing mortgage.
- Renting (leasing) out commercial properties to businesses.
- Flipping properties. Purchasing older or dilapidated homes, renovating them, and selling them for profit. If you have an eye for detail and can do some of the work yourself, you can make some big money when you sell.
- Real estate mutual funds and REITs. Rather than purchase a property outright and being the sole owner, a trust owns and manages the property, and you split the profits with the other trust holders.
How Much Money Can Real Estate Investors Make?
Asking how much money a real estate investor makes is like asking how long a piece of string is. There are so many factors that influence how much money an investor makes. Types of real estate investments, number of investments, and how well they are managed can all affect how much money is made. Even some factors that are out of an individual’s control such as the economy, can drastically change how much money is made in a single year.
Mashvisor calculates that on average, a real estate investor can make an annual rate of return between 8% and 12%. Residential investments tend to have a bigger return (averaging 10.6%), and commercial is slightly less at 9.5%. So rather than saying that as an investor you will make a certain amount, it clearly depends on how much you are willing to invest. If you are successful and build a solid portfolio, Financial Wolves estimates that you could easily bring in up to and beyond $150,000 a year. So, it definitely has the potential to become a full-time career.
How to Become a Successful Real Estate Investor
Unfortunately, there is no guaranteed method to ensure success when it comes to real estate investing. With the high level of success and financial freedom comes risk. The best piece of advice is to get training and maximize your knowledge before investing. Start small. Failure is almost inevitable, and its better that you lose a bit of money and learn a lesson, than lose everything you have worked for and have to start from scratch.
Do not underestimate the work involved and ensure that you stay vigilant and track your investments. You need to know where your money is, and how your assets are performing. That way you can maximize your results and start earning some serious money.
Investing in real estate means something different for everyone. Some people will own multiple properties and have a huge portfolio. Someone else may own a single property and simply rent out a room for an extra $100 a month. The earning potential for a real estate investor is varied, and really depends on how much work and investment you are willing to put in.
Charles is the founder of infoSpike.com. His real estate investing experience started in 2004 and he is currently focused on rental property projects. He enjoys learning about real estate investing, personal finance, and marketing. Read more about Charles here.