Tonja Hartung
4/12/2020
MAN222- Investment Principles
Week 2 Assignment- Evaluate the ways to profit from Real Estate Investments
This week in MAN222-Investment Principles, I learned some of the many different ways
that I could earn a profit by investing in real estate. To be honest, I never realized that there were
so many different ways to go about doing this.
The way that I am most familiar with is by renting out the property to someone else.
“Income properties typically yield (unleveraged) cash flows of 5 to 12 percent per year” (Carey,
Larsen, & Eldred, 2016). Therefore, a property owner whose property is free and clear of
financing could end up earning themselves a very nice return on investment each year. For
instance, if I were to own a $300,000 home that was free and clear of financing, I could
essentially pocket between $15,000 to $36,000 per year by renting out my property to someone
else.
As I stated earlier, I have since learned that there are many other ways to earn a profit by
investing in real estate. For instance, if a property owner possesses a freehold estate, they are
said to own divisible property rights. “A freehold estate is ownership of land in which you have
exclusive rights for an unlimited length of time” (Real Estate Exam Ninja, 2020). Therefore, the
property owner can then decide to subdivide their bundle of rights. By doing so, the property
owner can either sell or lease their divisible property rights to different people. Some of the
divisible property rights that a property owner sells or leases to other parties may include (but are
not limited to): air rights, mineral rights, oil and gas rights, coal rights, access rights, subsurface
rights, development rights, water rights, leasehold rights, grazing rights, timber rights,
solar/sunlight rights, easement rights, or life estate rights (Carey, Larsen, & Eldred, 2016). For
example, let’s assume that a property owner purchased a densely forested property. They might
decide to sell or lease their timber rights to a local logging company. This would give the logging
company the right to remove the trees from the property and do with them as they please.
Another popular method used to generate profits from real estate investments is with the
fix, sell, profit method. I first came to know this particular method by watching television shows
such as Flipping Vegas with Scott and Amie Yancey. Scott and Amie would find bargain-priced,
neglected or distressed properties in the Las Vegas area and purchase them. They would then
renovate the properties that they purchased and sell them for a lucrative profit. At one point,
Scott and Amie held a conference in Galveston, Texas in which I decided to attend. During this
conference, they explained how I too could do the same thing in my area with little to no money
of my own.
