Apartment rentals, REITs, real estate as well as crowdfunding platforms are all types of real estate investments.
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There are many kinds of real estate investments, however the majority of them fall in two categories: Physical real estate investments such as land, commercial and residential properties and various other investment options that do not require physical property, like REITs and crowdfunding platforms.
The traditional investment in physical property can provide high returns, but it will require more money upfront , and may have significant ongoing costs. REITs and crowdfunding platforms offer low financial barriers for entry, which means that you can invest in a variety of real estate at lower than what it would cost to purchase a single traditional property. These alternative real estate investments are also a great option because they offer the benefit of not having to leave the house or dress in a suit in order to invest.
If you’re planning to invest in real estate the following five types you should consider:
1. REITs
Publicly traded REITs also known as real estate investment trusts are companies that own commercial real estate (think offices, hotels along with malls). It is possible to invest in shares of these companies on a stock exchange. By investing in REITs you invest in the property these companies own without having to take on the risks involved with owning real estate directly.
REITs must return at most 90% of the tax-deductible earnings to shareholders each year. Investors will be able to receive attractive dividends as well as diversifying their portfolios with real estate. Reit that are publicly traded can also provide more liquidity than other real investment options: If you need cash, you are able to sell your shares via the stock exchange. If you’d like to invest in REITs that are publicly traded You can do so through the use of a brokerage account.
2. Platforms for crowdfunding
The real estate crowdfunding platforms provide investors access to real estate investments that could provide high returns, but involve significant risk. Some crowdfunding platforms are accessible only for accredited investors that is, people with an estimated net worth, or joint net worth , with spouse, that is greater than $1 million — exempting the amount of their home- or an annual income for the last two years exceeding $200,000 ($300,000 with the spouse).
“Keep in mind, many crowdfunding platforms have an insufficient experience, and are yet to go through the economic recession.”
Others, such as Fundrise and RealtyMogul, offer investors who do not meet those requirements — referred to as non-accredited investors access to investments they wouldn’t otherwise be eligible to invest in. These investments typically take the form of nontraded REITs, or REITs that don’t make use of the market for stock. Since they’re not traded publicly REITs that aren’t traded are very liquid, which means that the funds you invest for at minimum a number of years as well as you might not be able to take the money from the investment in case you need it. Consider that many crowdfunding platforms have only a brief history and have not yet been able to survive the economic recession.
3. Residential real estate
Real estate that is residential is everywhere that people live and reside, such as single family homes, condos , and vacation homes. Residential real estate investors make profits by collecting rent (or regular payments for short-term rentals) from property tenants via the appreciation value their property accrues between when they purchase it and when they sell it, or both.
Affording residential real estate can take many shapes. It could be as easy as renting out your spare room or as complex as purchasing and flipping a home to make gain.
4. Commercial real estate
Commercial real estate refers to space that is leased or rented by a company. A office building rented by one company, a gas station, an outlet mall that houses several distinct businesses, and restaurants leased are all cases of commercial estate. Unless the business owns the property in which case each business has to pay rent to the property’s owner.
Real estate for retail and industrial use are often included under the umbrella of commercial. Industrial real estate generally refers to properties where products are created or stored rather than sold. This includes warehouses and factories. Retail space is the place where the customer can purchase a product or service, like the clothing store. Commercial properties tend to have long leases and command higher rents than residential properties. This can result in a greater and steady long-term revenue for a property owner. But they may also require more money for down payment and administration costs.
5. Raw land
If you build it, how will they get there? The majority of investors purchase land for either residential or commercial development.
However, buying land to develop involves a fair amount of market research, particularly if you plan to develop the property yourself. This type of investment is best advised for someone with the capital to invest as well as a thorough understanding of all things real estate –building codes, flood plains, zoning rules — in addition to knowledge of local commercial and residential rental markets.
Which real estate investment is the best for Richardson?
If you’re considering purchasing traditional property -either commercial or residential properties, doing your due diligence doesn’t necessarily mean you’ll have to come up with a a down payment. Understanding the local market is essential. If there’s not a lot of demand for homes or commercial space in the area you live in or the value of your property starts sinking, that investment may quickly become a burden.
If you’d rather have more control over the investments you make, then REITs as well as crowdfunding platforms provide a simple way to add real estate your portfolio without owning physical property.
Some brokerages offer REITs publicly traded as well as REIT mutual funds.