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The two ways of making money in real estate are as an investor or by acting as an agent. Real estate investing typically takes a great deal of money or good credit, and can involve the purchase of single properties or participation in a fund or trust. Many people that invest in property on their own have a keen understanding of the local market, though making money in real estate through a fund or trust can be possible without any advanced knowledge. In order to make money by acting as a buyer's or seller's agent, there may be certain necessary requirements. To become a real estate agent or broker, an individual typically needs to complete some type of education and pass an exam.
There are many different ways that an investor can go about making money in real estate, beginning with the purchase and sale of land. The attractive quality that land has for many investors is scarcity, since more cannot be made. Though land values can fluctuate widely based on market demand, the economy, and other factors, most real estate eventually increases in value. Many investors are interested in short term gains, so buying land on speculation is a common activity. This typically involves buying property in an area that shows signs of imminent growth, development, zoning changes, or other factors that could lead to an immediate increase in value.
Another way of making money in real estate is to purchase income property, such as rental homes or commercial buildings. This kind of real estate can provide an attractive monthly return, and the property may often be sold later for a profit. Many businesses pay rent that is roughly equal to their net revenue, so owning and leasing out property can be an attractive income source.
Real estate funds, trusts, and other vehicles can also buy, sell, and rent property. This can provide a way of making money in real estate without obtaining any special knowledge. Real estate trusts can sometimes be traded as easily as stocks and bonds.
It is also possible to make money in real estate by acting as an agent or broker. These jobs typically involve handling all the minutia of real estate transactions, though responsibilities and duties can vary from one location to another. In exchange for assisting a buyer or seller move through the process, the agent or broker typically takes a percentage of the transaction amount as a fee. This can be a good way of making money in real estate, especially for people with excellent sales and interpersonal skills.
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