How much can you make in real estate?

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.

The benefits and drawbacks of real estate investment

Investing in real estate can be rewarding, but there are also some risks and downsides to consider.

Pros of real estate investing

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:

• Tax benefits: Real estate investing has some key tax benefits – you can write off mortgage interest, property taxes, maintenance and other business expenses.
• Recurring income: Owning or investing in real estate can provide a regular source of cash flow, which can be supplemental to your monthly income.
• Appreciable value: Real estate tends to appreciate in value, so in the future, you’ll be able to sell a property for more than you bought it.
• Equity: As you make payments on an investment property loan, you’ll build equity (aka ownership) in it, which you can use as leverage for other investments.

Cons of real estate investing

It’s also important to consider the downsides of real estate investing. Here are some risks to keep in mind before you get started:

• Requires startup money: Because of the price of purchasing properties, getting started in real estate tends to have high startup costs, which not everyone can afford.
• Emphasizes the long term: Real estate investing isn’t a get-rich-quick scheme. Instead, being successful is a long-term strategy that requires time and effort.
• Depends on unpredictable factors: Real estate investments can be vulnerable to factors outside of your control, including tenants, the economy and more.
• Requires hands-on effort: Owning a real estate property is hardly passive – instead, it requires a lot of hands-on effort, including maintenance and management.

What influences a real estate investor’s salary?

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

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.

Property value

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.

Demographics

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.

The economy

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.

Real estate investing roles

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.

• Real estate investor: A real estate investor is the person who puts up the upfront cost. Real estate investing can take many different forms, including owning rental properties – either single-family, multifamily or commercial – flipping properties, and more. The average salary of a real estate investor ranges from $106,293 in Arkansas to $161,675 in New York, according to ZipRecruiter.
• Real estate agent or REALTOR^®: A real estate agent is someone who is licensed to help clients buy and sell real estate, while a REALTOR^® is someone who is a member of the National Association of REALTORS^®. According to ZipRecruiter, the average agent in the U.S. earns $96,315 per year, though salaries can be much higher or lower.
• Real estate broker: A real estate broker is similar to an agent, but this professional owns and operates a real estate brokerage or agency. Think of a broker as an agent who has taken their career to the next level. According to ZipRecruiter, the national average broker salary is $91,873 per year, though they can get considerably higher.
• Property manager: A property manager is someone who manages a real estate property on behalf of the owner or investor. The property manager vets and works with tenants, oversees property maintenance and more. Property management can be a good first step for someone interested in getting into real estate investing. According to ZipRecruiter, the average real estate property manager earns $45,830 per year in the U.S.

How to increase your earnings in real estate

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.

The bottom line: In real estate, you get out what you put in

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.