If you own money that needs investing to grow its value and secure its future, financial experts suggest exploring multiple investment avenues available on the market: stocks, bonds, exchange trading funds, mutual funds and real estate are just a few options to consider when searching for suitable opportunities to put it to good use.
Each option offers something unique; your selection will depend on your involvement level and budget constraints; risk levels should also be taken into consideration as each investment holds equal chances for profit and loss.
Real estate investment stands out among other investment options as being more reliable, lucrative and passive income-generating. Real estate properties provide more security and tangible returns compared to other investments; their values have steadily been increasing for several years; investors are attracted to investing in this business because of its profitability, tax benefits and cash flow potential – meaning there’s less chance of money loss in its practice than many others.
If you are new to real estate investing, then it is essential that you become educated on its business and types of investment options available to you. In this blog post we’ll outline five forms of real estate investments so that when it comes time to make decisions regarding which fits best with your budget, experience, and time constraints.
Categories Of Real Estate Investment
Real estate is defined as land, a business, or dealing with land and buildings and physical properties built on the land is a real estate business. Whether you sell a property, own it, or receive rent from tenants, it is all included in real estate investment.
There are many types of real estate investment but these all fall into two categories: physical real estate investment in which residential, commercial, industrial, and raw land real estate types are included, and the second category is distinguished from the former in a way that you do not physically own the property like in REITs and Crowdfunding investment.
Both categories have their specifications, pros, and cons to consider before making a decision. The first category is featured as traditional and common among investors, more profitable, and offers high returns but the investor also has to pay a heavy upfront amount, and in the second category you can start with low investment.
Here are the five types of real estate investment to consider before diving into the real estate business as an investor:
Residential Real Estate
Residential Real Estate is defined as a property used for residency. These properties include single-family homes, duplexes, triplexes, cooperatives, townhomes, and multifamily residences.
It is a traditional and simple form of real estate investment in which the owner of the property rents it out his property and receives passive income in the form of monthly rent.
To invest in residential real estate you must have the ability to manage the tenants. Renting out your home or any residential property is the steady flow of your income. To rent out your property, you have to follow the rules and regulations and you also have to spend some money on the maintenance of your property, dealing with tenants is also somehow a tough assignment.
There are also some other forms to invest in residential real estate properties like selling your property or flipping your home, you can have a massive amount in your hands.
Commercial Real Estate
Commercially used properties or properties used for some businesses like gas stations, grocery stores, restaurants, hospitals, hotels, offices, shopping centers, and theaters are referred to as commercial real estate. In commercial real estate investment, an owner of the property gets rent from businesses. The rent of commercial properties is higher than that of residential properties.
Industrial properties mean the properties where products are made i.e. warehouses, also come under the category of commercial real estate.
Raw Land
Raw land refers to an undeveloped or vacant space available for buying. Most of the investors with heavy investment in hand are more interested in Raw land investments. Raw land investment is a long-term plan. Investors hold the property for development and wait for the potential buyer who is ready to build something on this vacant land. The cost of investing in raw land is lower as compared to others.
Before investing in raw land, an investor has to consider some important factors so that he may get maximum benefits from this investment:
- Consider the appreciation value of the land.
- Hold it until the value increases.
- Give priority to the location – does it have a potential for future mega projects?
- Apply different investment strategies, like lease or using land for agricultural purposes or some recreational investment.
REITs (Real Estate Investment Trusts)
Real Estate Investment Trusts are real estate companies that own or manage commercial properties like hotels, offices, malls, and restaurants. Instead of having the fatigue of owning a property and then dealing with tenants, you also have to manage and follow all the rules of renting a property, you can simply buy shares of real estate property, that these companies own just like shares in the stock market.
By investing in these shares, you are free from the risks of owning property directly. In REITs investment you get the money from the profits that these companies earn, companies are bound to give money to their shareholders.
It is simply like the concept of having a rental real estate property without having the hassle of dealing with tenants or having the responsibility of maintenance of the property. Even if you need urgent money or you do not want to continue this investment, you have the option to sell your shares and get money immediately.
REIT investment has become more popular in the market, it resembles the stock market and it generates secure and passive income and increases your portfolio and returns.
Crowdfunding Platforms
Crowdfunding platforms are online platforms for investing in different real estate properties either commercial or residential properties. These platforms give access to accredited and non-accredited investors to have access to the real estate market.
By listing the different residential, commercial, and industrial projects, they allow investors or participants to choose the property to invest according to their resources. These online platforms provide the key details of the investments: location, expected returns, and the amount required for funding.
An investor can invest and earn income in the form of monthly rent, he can get passive income without direct involvement in the dealing.
Final Thoughts
Real Estate investment is the most trending and highly profitable investment for new investors. Before investing your money, go through deep research, and properly analyze the real estate market, build your relations with experienced and qualified developers. Keep in mind the benefits and drawbacks of each investment type and at the end consider your priorities and investment and then make a wise, appreciable, and money-making decision. Visit www.totallyhomerealestate.com
