Apartment rentals, REITs, Residential real estates the land market and crowdfunding platforms are all forms of real estate investments.
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There are a variety of real estate investment, but most fall into 2 categories: Physical estate investments , such as land, residential and commercial properties, and other ways of investing that don’t require owning physical property, like crowdfunding platforms and REITs.
Investing in traditional, physical real property may provide the highest return, but it is also more expensive in the beginning and has expensive ongoing costs. These crowdfunding platforms and REITs have less of a financial barrier to entry, meaning you can invest in a variety of real estate at lesser than it would for investing in one traditional property. These alternative real estate investments have the added benefit of not needing to leave your house or even put on a pair of pants before you can invest.
If you’re thinking of investing in real estate there are five types to look at:
1. REITs
The public market for publicly traded REITs that are publicly traded, or real estate investment trusts are companies that own commercial real estate (think hotels, offices or malls). You can purchase the shares of these companies on the stock exchange. When you invest in REITs, you are investing in the property these companies own and are not subject to the risks associated with owning real property directly.
REITs are required by law to return at the minimum of 90% of their profits that are tax-deductible to shareholders every year. That means investors can earn attractive dividends , in addition to diversifying their portfolios by investing in real estate. REITs traded on the public market also offer more liquidity than other estate investments. If you find yourself suddenly needing money, you could sell your shares through the exchange. If you’d like to buy REITs listed on the stock exchange it is possible to do this by opening the use of a broker account.
2. Platforms for crowdfunding
Real estate crowdfunding platforms allow investors access to real estate investments that may bring high returns but also are prone to risk. Some crowdfunding platforms are accessible only for accredited investors which is defined as people who have the net worth or joint net worth of an individual spouse, greater than $1 million exempting the value of their home — or an annual income in the last two years that exceeds $200,000 ($300,000 with one spouse).
“Keep in mind, many crowdfunding platforms are relatively new with a short track record and have yet to experience an economic slump.”
Some, like Fundrise as well as RealtyMogul provide investors who aren’t able to meet the minimums — also known as”nonnaccredited investors” access to funds they would otherwise be eligible to invest in. These investments often come in the form of non-traded REITs or REITs that do not operate on the Stock Exchange. Since they aren’t publicly traded Non-traded REITs are highly liquid, meaning that your funds will be entrusted to for at minimum a number of years, and you may not have the ability to pull your money from the investment if you want to use it. Consider that many crowdfunding platforms have only a brief track record, and have yet to weather an economic slump.
3. Residential real estate
Residential real estate can be found virtually everywhere that people live and reside, including single-family homes, condos , and vacation homes. Real estate investors who invest in residential properties earn income by acquiring rent (or regular rent for short-term rentals) from tenants in their properties, through the appreciated value their property earns between the time they purchase the property and when they decide to sell it, or both.
Affording residential real estate is a possibility that can take many kinds. It could be as easy as renting out an empty room or as complicated as buying and flipping the house to make gain.
4. Commercial real estate
Commercial real property is space that is leased or rent by a business. A building for office use leased by a single business or a gas station the strip mall which houses a number of unique businesses and leased restaurants are all cases of commercial property. As long as the company does not own the property and is a tenant, every business pays rent to the owner of the property.
Industrial and retail real estate may fall under the commercial umbrella. Industrial real estate typically includes properties where products are produced or housed, instead of sold, like factories and warehouses. Retail spaces are where consumers can purchase a product or servicesuch as the clothes store. Commercial properties usually have longer leases and can 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 down payments and higher property management expenses.
5. Raw land
If you build it, will they come? Investors usually buy land to develop either residential or commercial development.
But buying land to develop requires a lot of market research, especially in the event you want to develop the property yourself. This kind of investment is most at those who have lots of money to invest and an in-depth comprehension of everything that is real estate–building codes, flood plains, and zoning regulations as well as an understanding of local residential and commercial rental market.
Which real estate investment is the best one on The Colony?
If you’re considering buying traditional properties — like residential or commercial properties — making sure you do your homework doesn’t just mean coming up with money for a downpayment. Understanding the local market is vital. If there’s not much demand for residential or commercial space in your region or property values start sinking, that investment may quickly turn into a burden.
If you’d prefer to have more control over an investment, REITs as well as crowdfunding platforms provide a simple way to add real estate your portfolio without having physical property.
Some brokerages also offer publicly traded REITs and REIT mutual funds.
