Apartment rentals REITs, REITs, commercial real estate, land and crowdfunding platforms are all real estate investment.
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There are a variety of real estate investments but most fall into the two main categories of physical estate investments like land commercial and residential properties and other modes of investing that don’t require owning physical properties, like crowdfunding platforms and REITs.
Investing in traditional, physical real estate could yield an excellent return, however it also requires more money upfront , and may have an ongoing cost that is high. REITs as well as crowdfunding platforms have a lower financial barrier for entry, which means that you can invest in multiple types of real estate at lower than what it would cost for investing in one traditional property. Alternative real estate investments also offer the distinct advantage of not having to leave your house or dress in a suit in order to invest.
If you’re interested in investing in real estate the following five types you should consider:
The public market for publicly traded REITs also known as real property investment trusts, are firms which own commercial real estate (think offices, hotels and shopping malls). You can buy shares of these companies through an exchange. If you invest in REITs you’re investing in real estate properties these companies have, without as many of the risks involved with owning real property directly.
REITs must pay at the minimum of 90% of their profits that are tax-deductible to shareholders every year. Investors will be able to receive attractive dividends , in addition to diversifying their portfolios using real property. REITs traded on the public market also offer more liquidity than other investment options: If you need cash, you are able to sell your shares through the stock exchange. If you want to invest in REITs traded on the public market it is possible to do this by opening a brokerage account.
2. Platforms for crowdfunding
Platforms for crowdfunding in real estate offer investors access to real estate investments that may generate high returns but are prone to risk. Some crowdfunding platforms are available just to accredited investors being those with a net worth, or joint net worth , with spouse, of greater than $1 million — exempting the value of their home- or an annual income in the last two years exceeding $200,000 ($300,000 with the spouse).
“Keep in mindthat many crowdfunding platforms have an insufficient track record and have yet to weather the economic recession.”
Others, such as Fundrise as well as RealtyMogul, offer investors who aren’t able to meet the minimums — also known as”nonnaccredited” investors access to investments that they wouldn’t otherwise be capable of investing in. These investments typically take the form of nontraded REITs or REITs that do not sell on stock exchanges. Because they’re not traded on the stock exchange, nontraded REITs can be highly liquid, meaning that your money will be invested over a long period of time and you might not be able to withdraw your money from the investment in the event that you need it. Be aware that most crowdfunding platforms have a short time-line, and have yet to experience the economic recession.
3. Residential real estate
Residential real estate can be found almost anyplace where people live or reside, such as single family homes, condos and vacation houses. Real estate investors in residential real estate earn cash by taking rent (or regular payments for short-term rentals) from tenants, through the appreciated value their property will gain between when they purchase it and when they sell itor sell it.
Real estate investing in residential properties can take a variety of kinds. It could be as easy as renting out spare rooms or as difficult as buying and flipping houses to earn some profit.
4. Commercial real estate
Commercial real property is space that is leased or rent by a company. An office building rented by one company or a gas station a strip mall with several different businesses, as well as leased restaurants are just a few types of commercial estate. Except for the property that is, each company would pay rent to the property owner.
Industrial and retail real estate could fall under the umbrella of commercial. Industrial real estate typically includes properties where products are made or housed instead of sold, like warehouses and factories. Retail spaces are places where the customer can purchase a item or service, like the clothing store. Commercial properties usually have long leases and command more rent than residential properties, which may mean greater and steadier long-term income for a property owner. However, they can also need higher down payments and property management expenses.
5. Raw land
If you build it, will people come? Investors usually buy land for either residential or commercial development.
However, purchasing land for development will require a significant amount of market research, particularly when you intend to develop the land yourself. This type of investment is best suitable for someone who has an extensive amount of capital to invest as well as an extensive comprehension of everything that is real estate – building codes, flood plains, zoning regulations in addition to an understanding of local residential and commercial rental market.
Which real estate investment is the best?
If you’re thinking about the investment of traditional real estate- like residential or commercial properties, making sure you do your homework doesn’t just mean finding a the down payment. Understanding your local market is essential. If there isn’t much demand for commercial or residential space in the area you live in and property values begin dipping, that investment could quickly turn into an expense.
If you’d like to remain more in control of an investment, REITs and crowdfunding platforms can be a good way to add real estate to your portfolio without having to own physical property.
Certain brokerages offer REITs for sale on the open market as well as mutual funds.