Apartment rentals REITs, REITs, real estate, land and crowdfunding platforms are all types of real estate investment.
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There are various kinds of real estate investment, but the majority of them fall into two classes: Physical real investment in real estate, like land commercial and residential properties and other types of investment that don’t require physical property, for example crowdfunding platforms and REITs.
Investing in traditional, physical real estate may yield an impressive return on investment, however it requires more cash upfront and could have high ongoing costs. These crowdfunding platforms and REITs have the lowest financial barriers to entry. This means that you can invest in different types of real estate for far less than it would cost to invest in even one traditional property. These alternative investments in real estate also have the added advantage of not needing to leave your home or change into a suit in order to invest.
If you’re interested in investing in real estate There are five types to consider:
1. REITs
The public market for publicly traded REITs (also known as real estate investment trusts, are companies that manage commercial real property (think offices, hotels along with malls). You can purchase the shares of these companies via the stock exchange. When you invest in REITs, you’re investing in real estate that these companies own and do not have the risks involved with owning real property directly.
REITs have to pay at the minimum of 90% of their net income tax-deductible to shareholders each year. This means investors can receive attractive dividends in addition to diversifying their portfolios with real property. Publicly traded REITs also have greater liquidity than other estate investments: If you’re suddenly in need of funds, you may sell your shares via the exchange. If you want to put your money into publicly traded REITs then you can do that via a brokerage account.
2. Platforms for crowdfunding
Real estate crowdfunding platforms can provide investors access to real estate investment opportunities that can bring high returns but also have a significant risk. Certain crowdfunding platforms are accessible only to accredited investors that is, people with an net worth, or the combined net worth of a spouse, of more than $1 million — exempting the value of their home- or an annual income over the past two years exceeding $200,000 ($300,000 with the addition of a spouse).
“Keep in mindthat many crowdfunding platforms have a limited time-line, and they have yet to go through an economic slump.”
However, others, such as Fundrise or RealtyMogul which offer investors who aren’t able to meet the minimal requirements — also known as nonaccredited investors — access to funds they would otherwise be eligible to invest in. These investments are typically in the form of nontraded REITs, or REITs that don’t have a stock market listing. Because they’re not traded on the stock exchange, nontraded REITs can be extremely in liquid. This means that your funds will be entrusted to over a long period of time as well as you might not be able pull your money from the fund should you require it. Consider that many crowdfunding platforms have a very short track record and have not yet been through an economic slump.
3. Residential real estate
Residential real estate can be found almost everywhere people live or stay, such as single-family homes, condos and vacation homes. Residential real estate investors earn profits by collecting rent (or regular rent for short-term rentals) from tenants of their property, due to the appreciation the property gains between the time they purchase it and when they decide to sell it, or both.
Real estate investing in residential properties is a possibility that can take many kinds. It could be as easy as renting out spare rooms or as intricate as buying and flipping a home to make a profit.
4. Commercial real estate
Commercial real estate is a space that is leased or rent by a company. A building for office use leased by a single firm and a petrol station, a strip mall with several unique businesses and leased restaurants are just a few types of commercial property. Unless the business owns the property itself the business will pay rent to the owner of the property.
Real estate for retail and industrial use could fall under the umbrella of commercial. Industrial real estate usually refers to properties where products are produced or housed, instead of sold, such as warehouses and factories. Retail spaces are places where a customer can buy a product or servicesuch as clothing stores. Commercial properties usually have longer leases and may command more rent than residential properties, which may mean greater and steadier long-term income for a property owner. However, they could also require greater down payments as well as property management expenses.
5. Raw land
If you construct it, will they come? Investors usually purchase land for either commercial or residential development.
However, purchasing land for development involves a fair amount of market research, especially if you plan to develop the property yourself. This type of investment is best advised for someone with a large amount of capital to invest and a deep knowledge of all things real estate–building codes, flood plains, and zoning regulations as well as an understanding of local commercial and residential rental markets.
Which real estate investment is best on College Station?
If you’re considering the investment of traditional real estate -including commercial or residential properties, taking your time and doing your research doesn’t just mean having to make a cash for the down payment. Understanding your local market is important. If there’s little demand for residential or commercial space in your region or property values start falling, your investment can quickly turn into the burden.
If you’d rather take a more relaxed approach to your investments, REITs and crowdfunding platforms are great ways to include real estate in your portfolio without having physical property.
Some brokerages offer REITs that are publicly traded and mutual funds.
