People who are willing to invest in real estate are often confused because of the numerous possibilities of investment in this industry. Most of them usually have specific expectations and requirements from their future purchase. New investors, on the other hand, might not know where to start and which way to go to gain maximum benefit from their investment.
Therefore, it becomes extremely important for a young investor to understand the different avenues one can go about for investing in real estate. It is essential to know the art of weighing the pros and cons of each option and make a well informed decision.
1. Rental Properties
- Owning rental properties is one of the best investment opportunities for people with DIY (do-it-yourself) and renovation skills along with the patience of managing tenants.
- These properties provide regular income and are appreciable assets. So the value of these investments will increase with time, thus tilting the scales in your favour.
- The best part of owning rentals is the high leverage you get while applying for loans. So, you don’t have to dig up your pockets for 100% of the purchase price while buying these properties.
2. Real Estate Investment Groups (REIGs)
- These groups refer to entities that focus the majority of their business on investing in real estate. In standard REIGs, a company purchases or builds a set of apartment blocks or condos and allows investors to buy them, thus joining the group.
- A single investor can own a set of living spaces, but the actual maintenance and management is done by the company operating the REIG using a portion of the rent generated. So, you’ll act like a silent owner, getting the benefit of the investment without having to maintain it.
- These properties are appreciable and generate steady income but don’t require a more hands on approach. An investor can rent out the property without having to deal with the hassle of tenants.
- Typically, the lease of a REIG is in the investor’s name, and all of the units pool a portion of the rent to guard against the occasional vacancies. This allows the investor to earn even if their unit is empty.
3. House Flipping
- The terms ‘flipping houses’ or ‘fix and flip’ simply mean to buy properties for the sole purpose of repairing and renovating them, to eventually sell them for a profit.
- Thanks to popular TV shows, the concept of flipping houses has gained a lot of traction. It is the best opportunity for budding interior decorators or for people who simply love to recreate and renovate spaces.
- There is quite a lot of money to be made in this process granted the flip goes well. This is admittedly a long term process, but if done smartly and inside the time boundations, can generate a huge profit.
4. Property Sharing
- There are people who want to join others in investing in a bigger commercial or residential deal, rather than buying them on their own. Also known as ‘real estate crowdfunding’, these investments are done via such real estate platforms.
- Though these investments require capital, it is much less than what’s required to purchase these standalone properties.
- These real estate platforms connect investors who are looking to finance projects with real estate developers, without any geographical constraints. In some cases, the investors can diversify their investments with not much capital.
5. Real Estate Investment Trusts (REITs)
- REITs are corporations or special companies that operate, own, manage, or otherwise derive their income from real estate assets. They use investors’ money to form these trusts and REITs are bought and sold on the major exchanges, like any other stock.
- They are solid investments for stock market investors who desire regular income. REITs avoid paying corporate income taxes, as a corporation must payout 90% of its taxable profits in the form of dividends in order to maintain its REIT status. So, these are much more profitable investments as compared to the ones done with normal companies.
The real estate industry is chock full of options for all kinds of future venturers. Whether you are a new, hesitant investor or an expert, much experienced one, you can find the perfect opportunity to dabble into real estate and have a great experience.
We at Blockrise, can help you gauge this perfect opportunity for you. Let us provide you the guidance to make the best choice possible.