Apartment rentals, REITs, virtual real estate land and crowdfunding platforms are all real estate investment.
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There are several types of real estate investment, however the majority of them fall in two types: physical real estate investments like land, commercial and residential properties, and other modes of investing that don’t require ownership of physical property, like REITs and crowdfunding platforms.
Investments in traditional physical real estate can offer an excellent return, however it requires more cash upfront , and can incur the potential for high costs over time. REITs as well as crowdfunding platforms have lower barriers to entry, meaning that you can invest in many different kinds of real estate for less than it would to invest in even one traditional property. These alternatives to real estate investments have the additional benefit of not having to leave the house or wear a skirt to begin investing.
If you’re thinking of investing in real estate there are five types to think about:
The public market for publicly traded REITs that are publicly traded (also known as real-estate investment trusts, are businesses that manage commercial real property (think offices, hotels along with malls). You can buy shares of these companies through a stock exchange. When you invest in REITs, you invest in the real estate properties these companies have, without as many of the risks involved with owning real estate directly.
REITs are required to return at 90 percent of their net income tax-deductible to shareholders each year. Investors can therefore receive attractive dividends as well as diversifying their portfolios by investing in real property. Publicly traded REITs also offer greater liquidity than other estate investments: If you find yourself suddenly needing cash, you can sell your shares via the exchange. If you’d like to purchase REITs that are traded publicly, you can do so through a broker account.
2. Crowdfunding platforms
Real estate crowdfunding platforms can provide investors access to real estate investments that might generate high returns but pose a risk. Certain crowdfunding platforms are available only to accredited investors that is, people with the net worth or joint net worth , with spouse, of greater than $1 million — exempting the property valueor a yearly income within the last two years exceeding $200,000 ($300,000 with the spouse).
“Keep in mind, many crowdfunding platforms have a limited track record and have yet to weather the economic recession.”
There are others, too, like Fundrise and RealtyMogul and RealtyMogul, give investors who aren’t able to meet the minimums — known as”nonnaccredited” investors access to investments they wouldn’t otherwise be eligible to invest in. They usually come in the form of non-traded REITs which are REITs that don’t have a stock market listing. Because they’re not traded on the stock exchange REITs that aren’t traded are highly liquid, meaning that the funds you invest for at least a few years in the event that you don’t be able to withdraw your cash out of the investment if you need it. Be aware that most crowdfunding platforms have a very short history and have still to overcome an economic slump.
3. Residential real estate
Residential real estate can be found virtually anywhere people reside or reside, such as single family properties, condos and vacation houses. Residential real estate investors earn income by acquiring rent (or regular payments for short-term rentals) from tenants who live in the property, through the appreciated value the property gains between the time they purchase it and when they sell it, or both.
Affording residential real estate can take a variety of kinds. It could be as easy as renting out spare rooms or as difficult as buying and flipping a property to earn profits.
4. Commercial real estate
Commercial real estate refers to space that is rented or leased by a business. A commercial building that is rented by a single business or gas station one-stop mall with many different businesses, as well as leased restaurants are all examples of commercial real estate. If the business does not own the property the business will pay rent to the owner.
Real estate for retail and industrial use can fall under the commercial umbrella. Industrial real estate generally includes properties where products are manufactured or stored, rather than sold. This includes warehouses and factories. Retail spaces are where customers can purchase a item or service, like an apparel store. Commercial properties usually have longer leases , and they can charge more rent than residential properties, which could mean a higher and more stable long-term revenue for a property owner. However, they also may require more down payments and higher property administration costs.
5. Raw land
If you construct it, can they move in? Investors typically buy land for either residential or commercial development.
However, purchasing land for development will require a significant amount of market research, especially in the event that you are planning to develop the land yourself. This kind of investment is most suited to someone with lots of money to invest and a comprehensive understanding of all aspects of in real estate: building codes flood plains, zoning rules as well as an understanding of the local commercial and residential rental market.
Which investment in real estate is best on The Colony?
If you’re thinking about the investment of traditional real estate -either commercial or residential properties — being thorough doesn’t necessarily mean you’ll have to come up with a an initial down payment. Knowing your local market is crucial. If there’s little demand for residential or commercial space in your region or property values start declining, your investment could quickly become one of the biggest burdens.
If you’d rather be more hands-off with investment decisions, REITs and crowdfunding platforms are great ways to include real estate in your portfolio without owning physical property.
Some brokerages also offer REITs for sale on the open market as well as mutual funds.