PUBLISHED: Aug 12, 2023
Real estate can be a lucrative field, whether you’re working as an investor, a broker, an agent or anything else. It’s become one of the most popular investment opportunities thanks to its potential for recurring income, asset appreciation, tax savings and more.
If you’re considering investing in real estate, you’re probably wondering just how much money you can make. Keep reading to learn the pros and cons of real estate investing, the factors that can affect your earnings, the different ways to make money in real estate and more.
Investing in real estate can be rewarding, but there are also some risks and downsides to consider.
There are some major benefits to real estate investing when it comes to taxes, cash flow, equity and more. Here are just a few benefits:
It’s also important to consider the downsides of real estate investing. Here are some risks to keep in mind before you get started:
Many different factors can influence the amount you can earn as a real estate investor. And these factors – along with your income – can fluctuate over time.
Location is one of the most important factors that can affect how much a real estate investor, agent or broker earns. It probably comes as no surprise that a real estate professional in Los Angeles or New York City has a different earning potential than someone in a less populated area with a low cost of living.
It’s worth noting that location doesn’t necessarily have to hold you back. Some people choose to invest in real estate areas other than where they live. For example, if you live in an area with a poor rental market, you might choose to buy a rental property elsewhere.
A property’s value can affect just about everything related to the costs and income generated from an investment property. Property value affects the cost of insurance and taxation. It also affects how much a broker or agent can earn in commission on a property, as well as how much an investor can charge when either selling or renting the property.
Changing demographics can have a major impact on the value of a particular real estate investment. Different generations may have different needs when it comes to real estate, causing certain properties to become more or less valuable over time. Additionally, a property’s investment value may change as the local demographics change.
It probably comes as no surprise that the economy has a significant impact on how much you can earn in real estate investment. When the economy is doing well, people are buying or renting homes and property values may increase. On the other hand, an underperforming economy could be bad news for real estate investors, as it impacts buyers’ ability to purchase a home.
The economy also affects interest rates. Higher interest rates are an added cost for real estate investors, which can reduce their ultimate profit. Higher interest rates also reduce demand for properties, which can have a negative impact on prices.
Building a career in real estate doesn’t have to follow a one-size-fits-all approach. There are several different roles you can play, each of which has different pros, cons and earning potential.
The average salaries in real estate investing are just that: averages. Plenty of investors earn less, while others earn far more.
One way to earn more through real estate investing – one that we’ve already mentioned – is to move your investments to a better area for real estate investing. You don’t necessarily have to physically move (though you certainly could). Instead, you can invest somewhere other than where you live.
Another way to increase your earnings is to diversify your investment portfolio. Having just one investment is risky because if for some reason the investment loses money, so do you. For example, suppose you own an investment property but can’t find a tenant. For every month you don’t have a tenant, you’re losing money. But if you had multiple real estate investments, you might still have net positive earnings.
Finally, look for ways to improve your skills. This could include getting a mentor who can help guide you, taking classes to help improve specific skills and investing in improving in those areas you may be lacking.
Real estate can be an exciting investment and has consistently remained one of the most popular ways for investors to make money.
While each role in real estate investing has an average salary, the range of what you can actually earn is quite broad. And like other things, you’ll often get out of it what you put into it. Real estate isn’t quite the passive income source many sell it as – it usually takes time, effort and capital.
If you’re ready to start investing in real estate, buying a home is a great place to start. You can stick with just one investment property or use that first one as a launch pad to a larger portfolio.
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