Options for Investing in Real Estate
The real estate market is evolving rapidly. With this transformation, investors are being offered new opportunities and the available investment choices are expanding. Like all important decisions, investment choices should be tailored to meet your unique needs and circumstances. Think about how much capital you are willing to commit, the time you have on your hands, and perhaps most importantly, whether you want a hands-on or hands-off approach to your investment.
While investments in real estate can generate solid returns, you need to understand what option works best for you. Issues to consider include the kind of desired liquidity, your risk tolerance, and how regularly you need the real estate income. Having noted these factors, several options are available for investing in real estate.
For those interested in a hands-on investment option, rental properties are ideal. In this approach, you buy a piece of real estate that you rent to tenants. As the landlord and property owner, you are responsible for maintaining and repairing the property as well as meeting its tax obligations. You not only make money from the rental income received, but if you later opt to sell the property, you stand to gain if it has appreciated.
Another hands-on investment option is to buy, fix, and flip properties. This is an investing model that is gaining popularity among people with some capital to spare. It involves investing in a residential or commercial property that needs some maintenance or repair, fixing it up, and then selling it at a profit.
In this investment method, you own the property for a relatively short period, as the objective is to flip it as quickly as possible. The goal is to make the asset look more aesthetically appealing through minor repairs such as a new paint or landscaping before selling it. However, if you do your market research well, it has the potential of earning healthy returns on your investment.
Real estate investment groups (REIGs), sometimes known as real estate investment trusts (REITs), are ideal when you want to own real estate without having to undergo the hassles associated with its management. However, investing in REIGs or REITs requires access to financing or a capital cushion.
Typically, the group or trust builds or buys a set of condos or apartment blocks, then allows individual investors to purchase shares in the property when they join the group or trust. Other types of properties that can be bought include shopping malls, office buildings, medical office space, or industrial real estate.
This is a hands-off investment vehicle, as the company or trust manages all aspects of the real estate including maintenance, repairs, advertising, and acquiring tenants. In exchange, the group running the property takes a percentage of the income earned.
For those who want to collaborate or partner with others in larger residential or commercial property deals, real estate investing platforms are a good option. These platforms, mostly found online, connect individual investors with real estate developers who are interested in financing projects.
Although it still requires some capital, it’s usually less than what you would require to purchase a piece of property outright. Platforms to consider include Lending Club, Money360, SoFi, Prosper, LendingHome, LendingOne, and Groundfloor.
