Real estate companies no longer simply rely on traditional selling methods such as hanging ‘for sale’ boards outside houses or advertising in the newspaper. They have had to find more innovative ways to attract new clients. Over the years there have been several companies that overcame the economic challenges and managed to not only sell the most property, but also find nuanced ways of doing so.
Operating a real estate venture can be highly lucrative, provided that you conduct thorough due diligence. Here are the 4 most common ways real estate businesses make money:
- Cash Flow: Possessing and leasing a property that generates more in rental earnings than it incurs in expenses leads to positive net cash flow.
- Value Appreciation: Your property’s value could potentially grow over time, whether through enhancing its net cash flow, improving the property itself, or due to shifts in the marketplace.
- Loan Paydown: Numerous property investors opt for a mortgage to acquire a rental property. Each mortgage repayment not only reduces the outstanding principal amount but also boosts your property’s equity. Over time, you might become the outright owner of the property – an advantageous situation when your tenant is effectively paying off your debt.
- Tax Benefits: A real estate investment can often provide tax shelter benefits, potentially protecting its own income from taxes, and frequently sheltering income from other sources too.