How do people make money by buying and selling property? Business people have been doing this for years, and it proves to be an industry that makes good money.
Property values increase rapidly in a year, especially when there’s a huge development happening in the area. So if you acquire your first or second property: sell and buy another one, then you could actually make profit from it.
Buy and sell property is just one secret on how people make profit in real estate.
Easy as it may sound, you need to realise that this type of investment requires money…BUT makes money too. So how do people do it? Are you guaranteed a profit? How easy is it to buy and sell property?
Let’s dig deeper into this topic here, and let us help you decide whether this type of investment is right for you.
How do people make money from buying and selling property?
Real property offers a profit through appreciation – which means, it increases in value. Andrew Beatie (2021)[1] from Investopedia claims that this profit can be done for different properties, but is achieved only in one way: through selling.
However this does not guarantee an exact amount or percentage of profit since there are several factors to consider, like location, condition of the property, and many more.
Increasing your return on investment (ROI) is possible through different means. Let’s go through these examples:
- Refinancing – If you borrowed money for the property, you could refinance your loan at a lower interest. The result will be a lower cost basis for the property, which increases the amount you will clear from the sale.
- Property development – When you have an undeveloped land or property, the most obvious way to make money from it is by developing it. In an expanding city, land outside the limits becomes more valuable because developers can potentially buy it. When developers build houses or commercial buildings, the value of those buildings increases.
- Discovery of valuable minerals or other commodities – Although rare, land appreciation is also possible through discovery of valuable minerals and other commodities like oil, gravel deposits, trees and other natural resources. You only need to make sure that as property owner, you hold the rights to them.
- Perfect location – Residential property increases value when its surrounding area evolves. Changes in the neighborhood, such as adding schools, transit routes, shopping centers, parks, and more, allow for property values to rise.
- Home improvements – A property owner could also increase the value of a home by adding an extra bathroom, furnishing the rooms, remodeling the kitchen with state-of-the-art appliances, etc.
Buying and selling property can make profit as long as you consider these three things: location, development, and improvements.
If you need an expert to educate you on these crucial matters, DDDC Finance team is here for you. We have real estate experts who have years of experience in the industry whom you can trust to guide you in venturing into this investment.
Buying and selling your second property (or third, fourth, fifth and so on…) is not a walk in the park. If not done right, you might end up losing more money than earning profit.
Steps to Get Started in Buying and Selling Property
Jenkins (n.d.)[2] warns future property buyers and sellers that the real estate business can be risky. If you’re dead serious about venturing into real estate, then be ready to do the next steps.
- Check your finances. Make sure that your financial situation is under control. Have at least six months of emergency fund, a retirement account, and some other investments too. In other words, you need a safety net before taking on a huge risk in real estate.
- Research neighborhoods. According to Jenkins (n.d.)[2], you must follow the famous real estate and Wall Street adage: “Buy low, sell high.” The best time to buy real estate is during periods of economic uncertainty. Check among lower-income neighborhoods, especially if you are into fixer-uppers. In Australia, the cheapest time to buy property is just before or just after winter.
- Investigate value trends. Check online resources that provide estimates and previous sales on property values in the neighborhood you’re considering. Although there’s no scientific way to do this, look for the most ideal “bottoming out” to suggest when the housing market will turn around.
- Be updated with rate trends. Pay more attention to national rates. Look at a two-year report, and decide when rates have “bottomed out”.
- Get a low-cost mortgage. Your options include interest-only loans, adjustable and variable loans, and 40-year mortgages. Your main goal is not to reduce the principal, but to let the home appreciate on its own even without making improvements.
- Monitor the market. Keep checking the recent sales in the area, particularly those that are similar to your property in terms of size, location and condition.
- Put your property on sale when market prices are up. When property values begin to shoot up, sell your property. You can save a huge amount of money from commissions if you sell your property on your own, but it’s usually more difficult to get a buyer. Take note, apart from the property sale you need to also process the capital gains and other paperwork.
If it’s your second property, buy and sell may not be unfamiliar to you anymore. But if this is not your field of expertise, it’ll be easy for you to make costly mistakes.
Do you need someone to guide you through the process? There are people who actually study this field, investigate the markets, and know strategic plans to make real property investments succeed.
DDDC Finance team can connect you with experienced coaches who have successfully helped close deals for our clients in buying and selling properties. Focus on learning the nitty-gritty of real estate investment, then let our coaches do the rest for you.
Related Topics:
[1] Beati, A. (2021). How to make money in real estate? Investopedia. Retrieved from https://www.investopedia.com/articles/mortgages-real-estate/11/make-money-in-real-estate.asp
[2] Jenkins, D. (n.d.). How to Make Money Buying & Selling a Home. Retrieved from https://smallbusiness.chron.com/make-money-buying-selling-home-16543.html
[3] Hickman, J. (2020). How do people make money by buying and selling property? Retrieved from https://www.wealthify.com/blog/how-do-people-make-money-by-buying-and-selling-property