9 Real Estate Business Models To Consider with Rising Interest Rates or When Inventories Are Low

It’s often said that more millionaires are made through real estate than any other type of business. But what real estate business models do they use?

While it’s difficult to measure the validity of that claim, one thing’s for sure: there’s a lot of money to be made in real estate.

Questions often raise about whether you should become a wholesaler, a flipper, an agent or broker, or even a hybrid agent/investor. As the real estate market changes and fluctuates (like it has in recent years), how do you make sure you choose the right investment specialty?

But one thing’s for sure: People will always buy or sell houses.

And investors who put their money into real estate — buying assets rather than liabilities — can create a lucrative future for themselves and their families.

So the question is, how should you get into real estate?

Here are nine popular real estate business models to consider.

Table of Contents

1. The Diversity of Real Estate Business Models
2. The Main Challenge of These Real Estate Business Models
3. Real Estate Agents
4. Wholesaling
5. Wholetailing
6. Buy-And-Hold Investing
7. House Flipping
8. Remote Investing
9. Listing Service For FSBO
10. BRRRR
11. More real estate investment business models (& a free planning template!)

The Diversity of Real Estate Business Models

There used to be just a few different real estate business models.

If you had access to a lot of capital, you could place big bets with the fix-and-flip system and hope the market didn’t dip at the wrong time. You could also buy-and-hold real estate, steadily expanding your portfolio and net worth.

You could become a real estate agent or broker without big money, netting 3% to 6% per transaction.

Those were the options.

Now things are much more diverse.

Here are the real estate business models we will cover in this article…

• Real estate agents
• Wholesaling
• Wholetailing
• Buy and hold investing
• House flipping
• Remote investing
• Listing service for FSBO
• BRRRR
• Hybrid agent/investor

The good news is… there’s a real estate business model that works with any budget. So long as you have the discipline to get started and keep going, you can win at real estate.

The Main Challenge of These Real Estate Business Models

While the business models below present a ton of opportunity for entrepreneurs — we’ve seen many agents and investors build thriving businesses in just about every market — they’re not free of challenges.

These challenges include hiring the right people, mathematically approaching every transaction, and building trust with buyers and sellers.

But one challenge stands above all the rest: consistently generating leads.

For agents and investors, having a consistent flow of leads makes your monthly income more predictable and allows you to grow your business more quickly.

How do you do that?

At Carrot, we specialize in helping investors and agents create simple, effective websites that rank in Google (and thus drive traffic) and systematically convert visitors into leads.

We’ve generated over 2.5 million leads for thousands of investors and agents nationwide. Take a Carrot demo to see how it works!

1. Real Estate Agents

When someone thinks about getting into real estate, being a real estate agent or broker is usually the first business model they consider.

Real estate agents make money by helping people buy and sell homes, usually pulling in between 3% and 6% of the sales price. A $250,000 home would net between $7,500 and $15,000.

To become a licensed realtor, you’ll need to research the requirements and processes in your local market — typically, this will include taking some courses and passing a test. You might also need to get sponsored by a real estate brokerage.

Pros

• Low barrier to entry. Anyone with enough time, determination, and sales savvy can become a real estate agent.
• Good profits on high-ticket homes.

Cons

• Requires expertise in sales.
• It takes time to build a name for yourself.
• The average transaction takes about 3 months to complete.

2. Wholesaling

Wholesaling is a real estate investing business model that’s cropped up over the last decade or so.

As a wholesaler, rather than flipping real estate or buying and holding your properties, you work as a sort of “deal finder” for other cash buyers. Your job is to find good deals (motivated sellers) and get them under contract for a price you and your cash buyer can afford. When you pass the deal onto the cash buyer, you’ll typically make a $5,000 to $20,000 assignment fee.

The most significant benefit to wholesaling real estate is that you don’t need a massive amount of money to get started — just a few thousand dollars to find and secure your first deal.

Pros

• May not require a license (check the state you’re wholesaling in).
• Requires just a few thousand dollars in startup capital.
• Good opportunity in most markets. (See the wholesaling opportunity in your market!)
• Can make up to $20,000 or more per deal.

Cons

• Wholesaling has become highly competitive in many markets.
• New regulations are being introduced in many states to regulate wholesaling.

3. Wholetailing

The word “wholetail” is a combination of “wholesale” and “retail.” In a wholetail deal, the investor buys a house for a low-ball price, makes just enough repairs so that it’s capable of selling on the MLS, and then sells it to a traditional buyer.

It’s not unusual to make $50,000 to $100,000 on a wholetail deal, but without nearly as much work as flipping takes.

We recommend wholetailing real estate when you’ve found a house that needs very few repairs, you can get it for a price that’s significantly under market value, and you have the cash (your own money or someone else’s) to purchase the home and make small updates.

Pros

• Wholetailing requires less work than a full flip, but has a big payoff.

Cons

• Wholetail deals are hard to come by.
• Wholetailing works better as a supplemental investing strategy than it does a primary business model.
• Requires access to large amounts of cash.

4. Buy-And-Hold Investing

Buy-and-hold investing is probably the best business model for increasing long-term wealth and net worth. In the buy-and-hold strategy, the investor buys properties (ideally ones that are a good deal), fills them with tenants to create cash flow, and holds.

Buy-and-hold investing aims to collect as many properties as possible and build as big of a portfolio as possible.

The hardest part of this business model is securing the cash to purchase properties consistently. We recommend seeking out private money or hard money to fund your deals.

Pros

• Great way to increase net worth.
• Creates a ton of passive cash flow.

Cons

• Need to manage properties and deal with tenants.
• Need access to a lot of capital to maintain momentum.

5. House Flipping

House flipping is the HGTV method of real estate investing and perhaps the most popularized way to make it big.

What these TV shows don’t talk about, though, is how house flipping is also one of the riskier real estate business models. During the time between when you buy a house and when you sell it (often 6 months or so), you’re just crossing your fingers that the market doesn’t take a hit.

Still, house flipping is a great real estate business model to add to your repertoire. It has higher risk, but also a higher payoff — often upwards of $100,000 for a single deal.

Pros

• Bigger cash payoff than any other investing model.

Cons

• Requires a lot of fixer-upper work.
• Has a higher risk.
• Requires a lot of upfront cash.

6. Remote Investing

Remote real estate investing has only become possible for the everyday investor in the last decade.

Technology has advanced so that investors can generate leads, find deals, inspect homes, purchase properties, and more… all without even being in the same state as the property they’re purchasing.

Check out our guide to learn more about virtual real estate investing.

This is a great option for people who don’t want their businesses tied down to a single location.

Pros

• You can operate anywhere in the U.S., accessing the most profitable markets.
• Gives you more time and freedom.

Cons

• It requires a lot of research before entering into a new market.
• Requires you to buy properties site unseen.
• You must build a business with clear-cut systems and hire trustworthy people you can depend on.

7. Listing Service For FSBO

What’s great about this business model is that once it’s set up, it can be almost entirely passive. Just hire a VA to manage some basic tasks and keep up with customer requests.

Here’s how it works: you get your real estate license, set up a website attracting for sale by owner (FSBO) sellers who want to list their house on the MLS, and offer to do it for a flat fee.

You can charge upwards of $250 per listing, for instance.

And as mentioned above, you can train a VA to do a lot of the heavy lifting. So once you’ve built the website and found ways to drive traffic (paid ads and/or SEO), this will run almost entirely on autopilot.

Pros

• Easy to set up and easy to manage.
• Decent money maker with very little work.

Cons

• Need a real estate license.
• Will be competing with other FSBO listers.
• Requires a good chunk of upfront work to get everything set up.
• Need to find ways to drive traffic consistently.

8. BRRRR

The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is a modified version of the buy-and-hold business model.

BRRRR is an ongoing process by which real estate investors can purchase multiple properties with very little capital relative to the growth of their portfolios. First, the investor finds a good deal and buys the property using cash, private money, or hard money. Then they rehab the property and fill it with tenants to start the cash flow.

After a seasoning period of 12-24 months, the investor does a cash-out refinance on the home — this is where a financial institution provides a new loan on the property and returns the cash that they used to purchase the property in the first place.

Then the investor repeats that process with their original funds. If the investor plays their card right, they can purchase many properties with the same funds.

Pros

• Allows for faster portfolio growth.

Cons

• Requires the investor to secure upfront funding.
• Requires very accurate math.

9. Hybrid Real Estate Model

The hybrid real estate model is a strategy where an agent is also an investor. As a hybrid agent/investor, you can offer sellers different options based on their need and your evaluation of the property.

For instance, you can offer:

If they’re looking to sell fast for speed and convenience and are willing to take a bit of a shave in equity, offer to buy the property yourself with a cash offer.

Or, if they want top dollar, you can be their seller’s agent and list the property for a traditional sale.

When you act as both the agent and investor, you can save yourself agent fees and avoid splitting your profits with an agent or investor partner.

“I’ve always worked with wholesalers and investors from the sales side. I decided to start generating those leads myself since I already had the network.”

– Mark St. Peter, a hybird agent/investor
Learn how Mark generated $75K+ in deals on a shoe string budget

Pros

• Flexibility to work with different types of sellers.
• Easier to adapt to market shifts.

Cons

• Requires agents to be open to learning more about investing.

More real estate investment business models (& a free planning template!)

There you have it! Nine of the most popular real estate business models.

If you don’t have much starting budget, wholesaling or becoming a real estate agent are wonderful options. If you have more capital, then you might consider flipping or BRRRR.

But they’re far from the only ones. With real estate investing, you can get as niche as you want. Other popular investment options are:

• Investing in rental properties
• Short-term rentals
• Land buying and/or land selling
• Mobile home selling
• Rent-to-own/tenant buyers

Whatever you decide, there’s plenty of opportunity in each business model. Before jumping in, be sure to research any local regulations (especially with wholesaling or short-term rentals) and the overall competition in your market so you understand what you’re up against.

When you’re ready to take the next step, snag the real estate business planning template to help you sort out your thoughts and set your business up for success.

Good luck!

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