Real estate has long been considered a critical pillar of wealth creation. Whether you want to build wealth for a comfortable retirement or you want to ensure financial security for future generations, real estate investing is a great tool. Here are a few ways you can build wealth with real estate investments, from investing in rental properties to raw land development and everything in between.

1. Rental Property Investments

One of the most popular ways to build wealth with real estate is investing in rental properties. Rental properties provide the opportunity for a continuous income stream from tenants as a form of passive income. You may choose to rent the property out monthly for steady income, or you may choose to turn it into a short-term vacation rental with tenants that stay for days to weeks at a time. Let’s take a look at an example. If you purchased a property for $200,000 and rented it out for $1,500 per month, you could potentially yield an annual return of $18,000. You can start with a single rental property and grow your portfolio to as many rental properties as you’d like to build wealth.

2. Property Appreciation

House on increasing stacks of coins to show appreciation

Another way to build wealth with real estate is with property appreciation. Properties tend to increase in value over time. If you hold on to a property long enough, you can sell it for much more than you originally paid for it. According to the U.S. Census Bureau, the average price of a home in the U.S. in 1940 was about $30,600 (after adjusting for inflation). By the year 2000, the average price had increased to $119,600. The current median sale price of homes in 2024 is $411,887. This shows that property value increases in the long term, and you can build wealth by holding on to real estate over time.

3. Flipping Properties

Flipping properties requires a lot of hard work and expertise, but it can yield high returns, making it a potential way to build wealth with real estate. House flipping involves purchasing a property, renovating it, and then selling it at a higher price to make a profit. The renovations you make can significantly increase the value of the property, earning you a sizable return on investment. According to ATTOM Data Solutions, in 2020 the average gross profit for a flipped house was $66,300, providing an average return on investment of 40.5 percent. This demonstrates a lucrative potential for building wealth through this real estate strategy.

4. Commercial Real Estate Investments

Agent shaking hands with client over signed contract

There are a number of ways to invest in commercial real estate, such as warehouses, offices, shopping centers, apartment complexes, etc. These types of properties tend to yield higher returns than residential real estate. This is due to higher rental rates and longer lease contracts. Investing in commercial properties can be a great way to diversify your portfolio and minimize risk to build wealth with real estate. This type of real estate investing involves a larger initial investment and more strategy, but it can provide a higher annual return to contribute to wealth accumulation.

5. Raw Land Development

If you are looking to build wealth with real estate, a viable way is through raw land development. You can purchase undeveloped land for a low price, then increase its value by building infrastructure such as utilities, roads, sewage systems, etc. After you develop the land, you can then sell it to commercial developers or home builders at a higher price so you can turn a profit. You may also choose to construct properties on it yourself to add another income stream. This can be a highly profitable investment, but it does require in-depth understanding of local laws, regulations, permits, and market conditions. Raw land development also requires more upfront capital and time invested.

More Real Estate Investment Tips

These are some of the many ways you can build wealth with real estate. One of the easiest strategies is purchasing Pigeon Forge cabins for sale for use as short-term rental properties to rent out to vacationers. This is a highly lucrative investment that allows you to make steady income throughout the year as well as to profit from property appreciation in the future when you sell it. If you have questions about investing in rental cabins, check out these FAQs about investing in Pigeon Forge cabins for sale so you can be an informed investor.