There’s a good reason why real estate remains a lucrative choice for business owners and entrepreneurs: It has a long history of being one of the most reliable ways to build wealth. Whether it’s your primary business or a side hustle, you can use some of the most profitable real estate business ideas to help secure your financial future.
The flexibility of working in real estate provides you with multiple income stream opportunities, so your hardest choice might be choosing the right part of the industry for you. This guide examines the top-performing real estate business models to help you decide which one you want to pursue.
Real Estate Rental Businesses
Renting to tenants won’t make you rich overnight, but it is among the most profitable real estate business ideas that can generate steady monthly cash flow for passive income.
A long-term rental houses tenants on a lease of a year or more and can generate steady income. A short-term, or vacation, rental is rented for 30 days or less and has the potential to generate high profits.
- Buy-and-hold residential rentals: You buy a property with the intent to hold it for several years, rent it out for a year or longer and collect monthly rent.
- Short-term vacation rentals (Airbnb/VRBO): This is a property you lease for 30 days or less, often to vacationers or business travelers.
- Multi-family rental properties: These are separate housing units within a single building, such as duplexes or triplexes; or several buildings, such as an apartment complex.
- Student housing: Rental homes or apartment buildings specifically intended for renting to students of a nearby college or university.
Property Flipping and Renovation
Two sides of the real estate entrepreneur coin are the fix-and-flip and wholesaling.
While flippers typically seek distressed houses, wholesalers target distressed property owners who can’t make repairs or need to sell quickly. The fix-and-flip model is high risk with potentially high rewards, and wholesaling is low risk and offers smaller profits.
- Fix-and-flip homes: You purchase a distressed property, renovate it and sell it for a profit, typically within four to 12 months.
- Wholesaling real estate: You enter a contract for a home below market value, assign the contract to an end-buyer at a higher price and profit from the difference in the prices, generally without making renovations.
Real Estate Service-Based Businesses
Continued population growth provides opportunities to build a real estate service-based business full-time or as a side hustle. Often, the business won’t require you to spend a lot of money to get off the ground, and it could be highly profitable if you decide to scale.
- Property management: You oversee properties, screening and acquiring tenants, collecting rents, inspecting sites and assigning repairs.
- Real estate photography/drone services: Offering images, especially from drones, can help show a property’s best features and leave a lasting impression on potential buyers or renters.
- Real estate marketing or lead generation: You can earn income by helping real estate agents gain leads and sell homes through marketing strategies, paid advertising, web design and lead nurturing.
- Real estate virtual assistant services: A real estate virtual assistant (REVA) supports an investor with scheduling, research, marketing and client communications to free the investor to focus on strategic business activities.
Real Estate Investing Businesses (No License Required)
If you want to invest in real estate but don’t have or want to get a license, that’s not a problem. The ever-evolving industry offers many other strategies.
- REIT investing: You can buy shares in a real estate investment trust (REIT), which is a company that owns, operates or finances income-generating residential or commercial properties. REITs trade like stocks, and dividends or interest are typically paid quarterly or annually.
- Crowdfunding and fractional ownership: Pool your money with others to fund large projects through crowdfunding or buy a share in a property through fractional ownership. Both typically require low upfront capital.
- Mobile home parks or land leasing: You can buy land to lease lots for mobile homes, to lease for other purposes such as farming or as an option to buy.
Niche and Emerging Real Estate Business Models
If you want to get even more specialized, real estate can cater to niche and emerging client segments. These lesser-known property investment ideas can also provide the chance for higher profitability. Consider these business types:
- Build-to-rent communities: Residential developments of single-family homes — detached houses, townhomes and cottages — built for renting.
- Senior living facilities: The U.S. now has its oldest population ever; you can provide specialized housing for seniors 65 and older, whose numbers are expected to climb 47% from 2022 to 2050 to reach 82 million residents.
- Storage unit rentals: Invest directly in this $23.6 billion industry or through REITs.
- Tiny home developments: Targeting affordable living by developing or investing in small homes that are typically 400 square feet or less.
- Mixed-use property development: Consumer demand for convenience and community and urban revitalization are driving the development of residential, commercial and sometimes industrial uses within one project.
How to Choose the Right Real Estate Business for You
Now that you know some of the most profitable real estate business ideas that are out there, you may want to launch a business. Consider these steps for choosing the right area for you:
- Identify your best business skills and interests.
- Choose the area of real estate (residential, commercial, etc.) you want to work in.
- Conduct thorough market research.
- Create a business plan.
- Build a strong online presence.
Real estate is a competitive industry. It’s critical to understand your local market, your risk tolerance, the capital you need and the time you have to commit. Consider starting small and scaling up with your success.
Final Thoughts: Real Estate as a Business, Not Just an Investment
Real estate investing can be your business, but you now know many other paths you can take to generate income. As the industry continues to evolve, consider evaluating your skills and interests, conducting market research and building a plan to find your fit.
Frequently Asked Questions
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If you have low capital, you can get started in real estate by wholesaling. Wholesaling involves finding a home at a significant discount, entering a contract with the seller, turning around and assigning that home to a buyer at a higher price and pocketing the difference between that price and your contract price.
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While the level of passivity can vary, there are several strategies for earning passive income from real estate. You can directly buy residential or commercial real estate and collect monthly rent, or try any of these methods of passive real estate investing: join a group of investors, buy shares of a REIT, invest in a fractional share of a property or pool your money with others through crowdfunding.
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Yes, most states require a real estate license if your property business involves getting paid for conducting a real estate service for someone else, especially if that service is typically done by a real estate agent or broker. A license may be required for being compensated for buying, selling, renting, leasing or exchanging real estate for someone else, but not for your investments.
