Brooklyn is a growing area. More people are moving in and calling this city home. For those who are interested in investing in property here, making money is likely a top priority.
The truth is, making money with real estate investing isn’t as simple as it may seem. While there are only a few ways to do this, it doesn’t mean it’s something for novices to try.
The good news is, there are a few basics of real estate to ensure that investing efforts are successful. Keep reading to learn how to maximize earnings here.
The Three Basic Ways to Earn Money on Brooklyn Real Estate Investments
Finding the right property is a crucial part of real estate investment. The information at NRIA.net/brooklyn-market can help. The next step is to learn how to make money on the investment.
There are three ways to make money on real estate investments. The first is to increase the property value.
Another is to collect rental income by leasing the purchased property to tenants. The last is earning profits generated from a business activity that depends on the purchased real estate.
That’s it. While there are other methods to indirectly or directly profit from a real estate investment, the three listed above are the most common. By learning how to best take advantage of these, it’s possible to add a new asset class to the overall asset allocation. Doing this increases diversification while reducing risk.
How to Increase Investment Property Value
It’s important to understand property values don’t always go up. This was painfully clear during the late 1980s and in the early 1990s. It occurred again during the real estate collapse that lasted from 2007 to 2009.
There are some situations where property values cannot overcome inflation. Consider this example.
Property is purchased at $500,000 at three percent inflation. The property may sell for $515,000. While this may be true, the investor isn’t any richer. That’s because the $15,000 gain isn’t real; it’s nominal.
This occurs when the government creates money because it spends more than it takes in through taxes. As time passes, this means every existing dollar loses some value. It becomes worth less and less each year.
One way savvy real estate investors can make money is by taking advantage of a situation that only occurs every few decades. If the rate of inflation is expected to exceed the long-term debt rate, it is possible to earn money. This is because people will take a gamble and wait for inflation to go up.
This allows them to pay off mortgages with money that’s worth less. This occurred during the 1970s and 1980s when inflation was out of control. The trick to making money on a real estate investment is to buy when rates are attractive or if there’s a reason to buy a piece of property.
Generate Rental Income from the Real Estate Investment
Making money by collecting rent is simple. If an apartment building, house, hotel, office building, or another type of property is owned, it’s possible to charge rent for the use of the facility or property.
Unfortunately, easy and simple aren’t the same. If a person owns rental houses or apartment buildings, they may have to deal with issues ranging from a broken toilet to tenants who operate a meth lab.
If the investment is made in a Brooklyn office building or strip mall, a business that leased the property may go bankrupt. For industrial warehouses, environmental investigations may occur because of tenants who use the property.
With real estate investments, it’s not possible to phone in and expect everything to go properly. There is good news. There are several tools to use to make comparisons on possible real estate investments.
Similar to how a stock is only worth the net present value of the discounted cash flows, real estate is only worth a combination of several things.
The first is the utility it generates for the owner. The second is the net present cash flows it can generate relative to the price paid. Rental income offers a margin of safety, protecting the investor during a collapse. Some types of real estate investments are best suited to this.
Purchasing real estate at the right price and at the right time is essential. Finding the right lease maturity profile and tenant could help an investor sail through a possible real estate collapse. This is possible by collecting above-average rental checks the renters have to provide even if lower rates are available elsewhere.
If an investor gets this wrong, they may be locked into subpar terms even after the market recovers. Proceed with caution when renting investment properties.
Money from Business Operations of Investment Real Estate
The last way to make money from investment property involves business activities and special services. If a hotel is owned, it’s possible to sell on-demand movies to guests.
If a Brooklyn office building is purchased, make money from parking garages or vending machines. For car washes, make money by installing time-controlled vacuum cleaners.
These investments virtually guarantee a profit. Those who succeed with this method understand the opportunities to make money is endless.
Making Money by Investing in Brooklyn Real Estate
If an investor wants to make money right away after investing in property, they have to know what options they have. As shown here, there are several ways to make money right away.
While this is true, finding the right property is a crucial element to consider. It’s also a good idea for investors to know their investment budget before trying to buy. This can help reduce cases of over-spending.
Making money by investing in real estate is possible. The key is to know what to do, what to avoid, and how to make the most of the purchased property. This is true regardless of if a person decides to invest in residential, commercial, or industrial property in Brooklyn.