Different types of real estate investment exist. However, most fall under two categories. There is the physical real estate investment like land, residential and commercial properties, and another which doesn’t require owning physical properties. This includes REITs, crowdfunding, and many more.
The physical real estate investment usually requires sufficient capital as it may have high ongoing costs. Meanwhile, REITs and crowdfunding do require an upfront cost. This implies that you can invest in many real estate properties since this type does not require much capital unlike the physical one.
If you are considering investing in real estate, here are some types for you.
REITs – REAL ESTATE INVESTMENT TRUSTS
Real estate investment trusts are companies that own commercial properties (offices, shopping malls, hotels). Investment takes place here by having a brokerage account. Here, you can invest in the share of these companies through the stock exchange market. By doing this, you are investing in the properties these companies own. This means you invest in their properties indirectly without associating yourself with many risks.
REITs return at least 90% of their taxable income to shareholders every year. This implies that investors are liable to attractive dividends as well as diversify their portfolio with real estate. Also, REITs have the advantage of offering more liquidity than other real estate investments. Moreover, if you feel like you need some cash, you can easily sell your shares on the stock exchange.
- CROWDFUNDING PLATFORMS
This offers investors access to the real estate industry but it often comes with significant risk. However, high returns are earned through this platform. Different platforms vary and have different modes of operation. Some platforms are only opened to accredited investors. They can be people that have a large net worth or have a significant amount of money. It may amount up to $200,000 – $300,000.
Meanwhile, other platforms such as Fundrise offer non-accredited investors the opportunity of investing in the firm of non-traded REITs. This means that they are not publicly traded and cannot be sold on the stock market. In other words, your money will be locked up for at least several years before you can withdraw it. This may hinder you as you will be unable to withdraw your money when you need it.
- RESIDENTIAL REAL ESTATE
Residential properties are homes where people reside. It can be an apartment, a condominium, a single-family house, and many more. Residential real investors earn income by collecting rent on a short-term basis from property tenants, selling their properties after it has appreciated in value. The income earned is usually determined by the location of the property. For instance, a property located in New York City generates more income than a city in Alaska. Therefore, ensure your properties are in a strategic location.
- COMMERCIAL REAL ESTATE
Commercial real properties are rented by a business. An office building, a shopping mall, or a restaurant is an example of a commercial property. However, industrial and retail stores do fall under this category. Industrial properties are places that facilitate industrial operations. They can be manufacturing sites, factories, warehouses, and lots more. Meanwhile, a retail store facilitates the buying and selling of products or services such as a clothing store.
Commercial real owners generate income by leasing their properties to business owners. This implies that unless the property is owned by the business owner, rents will be collected on a consistent basis. Also, commercial real owners tend to have more command and can lease for a longer period of time than residential owners. This means you get to have a higher and steadier income. However, the downside of these properties usually involves the management expenses used in maintaining the property.
- FIX AND FLIPS
If you are the person that loves buying properties and then, renovating them, this type may just be for you. In fix and flips, the investor purchases a property in a poorly-maintained state in order to renovate and sell. This implies that you buy the property at a lower price, renovate, and then juxtapose the expenses in order to make expenses. By juxtaposing the expenses, we mean you have to consider the amount used in purchasing the property as well as the one used in renovating them in order to declare the selling price.
- VACATION RENTALS
Vacation rentals is a growing business as lots of people are well accustomed to tourism. You can choose this option if you have a property at a tourist site that is just laying low. Here, you generate income by leasing out your property on a short-term basis to tourists. The downside here involves regular maintenance as you have to be hospitable to your visitors.
Real properties are used for different reasons to its owners. You just have to find the one that suits your needs.
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