Real estate has long been considered one of the best ways to build wealth. Whether you’re looking for passive income, quick flips, or long-term appreciation, there are multiple ways to profit in real estate. But not all methods are created equal—some require significant capital, others come with high risk, and a few offer a hands-off approach with strong returns.

In this guide, we’ll break down the most popular ways to make money in real estate, including their pros and cons. By the end, we’ll reveal the winner—the best real estate investing strategy for maximizing profits while minimizing headaches.

Let’s dive in!

House Flipping

How It Works

House flipping is the art of buying a distressed property, fixing it up, and selling it for a profit. The goal is to buy low, renovate efficiently, and sell high—ideally in a short time frame.

Pros

✅ Potential for High Profits – If done correctly, flipping can provide large, lump-sum profits.
✅ Tangible Investment – You can see and improve your asset.
✅ Fast Returns – Compared to rentals, profits can be realized quickly.

Cons

❌ High Risk – Renovation costs can spiral, and market downturns can leave you stuck with an unsellable home.
❌ Time-Consuming – Managing contractors and timelines is a full-time job.
❌ Expensive Upfront – Requires significant capital for purchase, renovations, and carrying costs.

Rental Properties

How It Works

Buying properties and renting them out generates monthly cash flow while also benefiting from long-term property appreciation.

Pros

✅ Steady Income – Monthly rental payments can create a consistent cash flow.
✅ Property Appreciation – Over time, real estate values tend to increase.
✅ Tax Benefits – Depreciation and deductions can reduce taxable income.

Cons

❌ Tenant Headaches – Late payments, property damage, and vacancies can be a problem.
❌ Management Required – Either self-manage (time-consuming) or pay for a property manager.
❌ Market Dependent – Economic downturns can reduce rental demand and property values.

Real Estate Wholesaling

How It Works

Wholesaling involves finding properties at a deep discount and assigning the contract to an end buyer for a fee—without ever taking ownership.

Pros

✅ Low Startup Costs – No need to own the property.
✅ Quick Payouts – Deals can close in weeks instead of months or years.
✅ Good for Beginners – Less financial risk than buying property.

Cons

❌ Requires Strong Networking – Finding motivated sellers and investors is key.
❌ Unstable Income – No deals, no income.
❌ Tight Profit Margins – Hard to find deep discounts in competitive markets.

Short-Term Rentals (Airbnb & VRBO)

How It Works

Short-term rentals allow you to rent out a property on a nightly or weekly basis to travelers instead of long-term tenants.

Pros

✅ Higher Earning Potential – Can generate more income than long-term rentals in the right markets.
✅ Personal Use – Owners can stay in the property when it’s not rented.
✅ Tax Benefits – Similar write-offs as long-term rentals.

Cons

❌ High Maintenance – Frequent cleanings, restocking supplies, and guest management.
❌ Regulatory Uncertainty – Some cities restrict or ban short-term rentals.
❌ Seasonal Demand – Income can fluctuate based on travel trends.

Real Estate Investment Trusts (REITs)

How It Works

REITs allow investors to own shares of real estate portfolios without buying physical property. These are publicly traded like stocks.

Pros

✅ Fully Passive – No property management or maintenance required.
✅ Diversification – Exposure to multiple properties in different sectors.
✅ Highly Liquid – Buy and sell like regular stocks.

Cons

❌ Lower Returns – Typically not as high as owning physical real estate.
❌ Market Volatility – REIT values can fluctuate like stocks.
❌ No Control – Investors can’t influence management decisions.

Mortgage Note Investing (The Hidden Gem)

How It Works

Instead of owning property, you own the mortgage note (the debt). Borrowers make monthly payments to you instead of a bank, providing passive income.

Pros

✅ True Passive Income – No tenants, maintenance, or property management headaches.
✅ Discounted Purchase Prices – You can buy non-performing notes at a discount and negotiate new terms.
✅ Higher Returns, Less Risk – More stable than house flipping and rentals, with strong ROI potential.
✅ More Control – You can modify loans, sell the note, or foreclose if necessary.

Cons

❌ Requires Some Knowledge – Understanding the note industry is key (but easier to learn than managing rental properties).
❌ Lower Liquidity – Notes aren’t as quickly bought and sold as stocks or REITs.
❌ Non-Performing Notes Need Strategy – But there are proven ways to turn them into profit.

And the Winner Is… Mortgage Note Investing! 

After reviewing all the ways to make money in real estate, mortgage note investing stands out as the best option.

Here’s why:
✅ Less Work, More Control – You’re not dealing with tenants, contractors, or constant management.
✅ Better Risk-Reward Balance – Higher returns than REITs, lower risk than flipping.
✅ Scalability – You can build a portfolio of notes without the headaches of property ownership.
✅ Passive Cash Flow – You collect monthly payments without landlord responsibilities.

The only con is it takes a bit of knowledge to get started – which makes sense because note investing is rarely talked about and it is truly real estates hidden goldmine. The good news is that very con is why NoteSchool was created! We are your trusted partner in note investing…

Your Journey to Real Estate Success Starts Here

Ready to achieve success in note investing? The best time to start is now! Take advantage of the resources below to learn from industry experts, connect with a thriving community, and unlock your full potential in creative real estate financing.

Your journey toward financial freedom begins today—don’t wait to take the next step!

Whenever you’re ready… here are 4 ways we can help you start your journey into note investing: