Many people invest in real estate for a variety of reasons. Some investors may seek long-term wealth growth or diversification of their portfolio, while others might be planning for a future retirement, saving for a child’s college education, or a dream wedding. Regardless of the motivation, there’s one thing all real estate investors have in common: they want to make money.

How much you can expect to make from a real estate investment depends on the type of property you buy and how you manage it. For example, a single family home is typically more expensive than an apartment building, but it can also have higher rental income. Whether you’re looking for a quick sale or a steady stream of income, understanding how to calculate ROI can help you find the right property for your investment goals. Must try

While there are many different ways to invest in real estate, the most common way is buying and renting out a piece of property. You can purchase a property with cash, get a traditional mortgage, or use alternative financing options like owner financing. The type of real estate you buy will affect your initial costs, so it’s important to consider how you plan to finance your investment and what other upfront expenses you might face.

Another popular way to invest in real estate is through a flipping strategy, which involves purchasing a property and renovating it for resale. This is a great way to generate cash flow, but it can be more risky than other types of real estate investing. You’ll need to understand the local market and have a good handle on renovation costs before attempting to flip a property.

For most real estate investors, the primary objective is to achieve a positive return on investment (ROI). ROI is an indication of how profitable your investment is by comparing net profit to the initial investment. It’s important to understand how to calculate ROI because it helps you estimate your total cost and forecast your income. It also helps you compare properties and make better decisions.

There are several methods professional property investors use to assess the profitability of a potential investment. For example, some use the 1% rule, which states that a rental property’s monthly rent should be at least 1% of its purchase price. Other formulas, such as the internal rate of return (IRR), take additional factors into account.

While there are many ways to invest in real estate, the most important thing is to choose an investment strategy that aligns with your financial goals. Before you start shopping for properties, consider your investment time horizon and how hands-on you want to be. If you’re looking for a more passive approach, you can invest in REITS, such as SLG (SL Greene), VNO (Vornado), or ESRT (Empire State Realty Trust), to gain exposure to NYC real estate without owning physical property. No matter your choice, it’s important to research property prices and determine how much capital you’ll need to secure a loan or mortgage.