By Ben Gobel — Mar 5, 2024

How to Make Money in Real Estate

There is almost no limit to the number of ways you can make money in real estate. Regardless of whether you are looking for a new, full-time career, or if you want for a completely passive investment strategy, real estate has something for you.

Here is a list of some of the most common ways people make money in real estate:

Real Estate Agent – A licensed professional who represent others in real estate transactions
Wholesaler – Someone who acts as a middleman between distressed sellers and other investors
House Flipper – A real estate investor that buys properties in need of repair, fixes them up, and “flips” them to a retail buyer
Rental Property Owner – A real estate investor that buys properties and rents them to tenants
Property Manager – A professional that manages rental property owned by a third-party
Lender – Someone who lends their money to other real estate investors in need of funds

Real Estate Agent

Becoming a real estate agent is one of the most common ways of making money in real estate.

Real estate agents are licensed professionals who assist buyers and sellers in real estate transactions.

While the requirements are different in every state, the process of becoming a real estate agent can generally be broken down into five (5) steps:

You must complete the required education and exam preparation. In Pennsylvania, for example, prospective agents are required to “successfully complete 75 hours of approved real estate education within 5 years of the passing date of both portions of the examination, and be at least 18 years old with a high school diploma or an equivalent.”
You must complete and pass a background check.
You must take and pass the state real estate licensing exam.
After passing the exam, you must apply for your real estate license.
Finally, you must join a brokerage.

In most states, In order to become an agent and legally practice real estate, you must work under a supervising broker. Brokers are licensed to oversee real estate transactions and ensure that you are adhering to the required legal and ethical standards.

Agents are typically paid on commission, i.e., they earn a percentage-based fee that is paid out of the proceeds of a real estate transaction. It is very much an “eat what you kill” sort of job. If the real estate transaction doesn’t close, you don’t get paid!

Wholesaler

Becoming a “wholesaler” is another relatively simple way of getting started making money in real estate. It’s simple, it’s not easy.

When you wholesale a property, you are essentially acting as a middleman. The wholesaling process can generally be broken down into four (4) steps:

You find an off-market property (i.e., not on the MLS) that is distressed, for one reason or another.
You sign a contract with the owner to purchase the property at a certain price, which should be lower than the actual market value of the property.
Now that you have the property under contract, you find a buyer for the property who is willing to pay more for the place than the contract price you have with the current owner/seller.
You take everything to a title company and they facilitate “closing the deal.” This results in you collecting the difference between the original contract price and what the end-buyer paid.

If you set the transaction up right, you can collect your fee without ever actually owning the property.

Before you jump into wholesaling, make sure to check out the laws in your state, the rules are different everywhere and you generally need to be careful that you do not act as a real estate agent.

If you’re interested in learning more about each of these steps, let me know in the comments below and I will do an entire post on the process.

Flipping Houses

Of all of the ways you can make money in real estate, over the past decade or so, flipping houses has probably gotten the most attention.

Flipping a house means you buy a place that needs some work, you fix it up, and you sell it for more than you paid for the property, plus the repairs. Sounds easy, right?

While all of the HGTV shows out there definitely make it look easy, it is actually really challenging. Not only do you need to find a property to buy below market value, you also need to properly manage the renovation.

Having undertaken dozens of projects at this point in my real estate investing career, I will tell you, renovations are tough. Between juggling contractors, subcontractors, material choices and costs, holding costs, not to mention unforeseen issues and expenses, renovating a property is hard work.

With all of that being said, it is extremely rewarding, you will get better at it over time, and there really is no better way to “force” appreciation of a property.

Rental Property Investor

Becoming a rental property investor is another way of making money in real estate.

The process is simple: buy a property, rent it out.

Owning rental property is my favorite way of investing in real estate because of the four (4) ways it will make you rich: cash flow, debt pay-down, appreciation, and tax benefits.

It does often take more money to get started in rental property investing, as opposed to becoming an agent or wholesaling, because of down payments, repair and maintenance issues, capital expenditures, etc., but there is no better way of building wealth.

Also, getting started by “house hacking,” which just means you purchase a property to live in and then rent out a portion of it, you can significantly reduce the downpayment you need to get started. For example, FHA loans only require a 3.5% downpayment.

Property Manager

If you enjoy being involved in the day-to-day operations of a owning an income property, becoming a property manger is a great way to earn income.

Lender or Note Investor

Another way of making money in real estate that most people do not think about is lending, or what is called “note investing.”

Note investing is generally the process of purchasing an existing mortgage / debt (usually at a discount), and then collecting the payments from the borrower. If you already have amassed a significant net worth, or if you are short on time and don’t want to go out and find deals yourself, lending to other real estate investors, or investing in notes, may be a great way to go.

These types of individuals are often called “private money” or “hard money” lenders. Or, in the case of notes, note investors. They are individuals who act like banks, they lend out money and collect interest.

In many ways, the lender is at the top of the food chain in the real estate investing world because it is just about the most passive form of investing out there. With that being said, these types of investors also normally have a great deal of real estate investing experience because you still need to be able to evaluate the person you are lending the money to, as well as the property that is securing your loan.

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