Apartment rentals, REITs, physical real estate Land and crowdfunding platforms are all forms of real estate investment.
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There are a variety of real estate investments but the majority of them fall into the two main categories of physical real property investments like land, commercial and residential properties, and other types of investment which don’t require the possession of physical property, like crowdfunding platforms and REITs.
A traditional investment in physical real estate may yield an excellent return, however it requires more cash upfront , and can incur high ongoing costs. REITs and crowdfunding platforms offer an easier financial barrier for entry, which means that you can invest in multiple types of real estate for lower than what it would cost to purchase a single traditional property. Alternative real estate investments have the additional benefit of not having to leave the house or dress in a suit in order to invest.
If you’re planning to invest in real estate there are five types to look at:
The public market for publicly traded REITs, also known as publicly traded (also known as real estate investment trusts are firms that have commercial real-estate (think hotels, offices and even malls). You can purchase REITs’ shares on the stock exchange. In investing in REITs you invest in the real estate they own and do not have the risks involved with owning real estate directly.
REITs are required to return at 90 percent of their annual taxable earnings to shareholders every year. This means investors can receive attractive dividends as well as diversifying their portfolios through real estate. REITs that are traded publicly also provide greater liquidity than other estate investments. If you’re in a position to suddenly need some cash, you can sell your shares via the stock exchange. If you want to invest in REITs traded on the public market, you can do so by opening the use of a brokerage account.
2. Platforms for crowdfunding
Real estate crowdfunding platforms give investors access to real estate investments that could bring high returns but also are prone to risk. Some crowdfunding platforms are open exclusively to investors who are accredited defined as individuals with assets, or joint net worth with one of their spouses, of more than $1 million — with the exception of the worth of their houseor a yearly income for the last two years that is greater than $200,000 ($300,000 with the spouse).
“Keep in mindthat the majority of crowdfunding platforms have only a brief track record, and have yet to experience an economic downturn.”
Other companies, including Fundrise as well as RealtyMogul and RealtyMogul, give investors who do not meet these minimums — known as”nonnaccredited investors,” access to investments that they wouldn’t otherwise be eligible to invest in. These investments typically take the form of nontraded REITs or REITs which don’t operate on the Stock Exchange. Since they’re not traded publicly and aren’t publicly traded, they can be very liquid, which means that the funds you invest for at least several years in the event that you don’t be able to take your money from the fund should you require it. Keep in mind, many crowdfunding platforms have a shaky time-line, and have not yet been able to survive the economic recession.
3. Residential real estate
Residential real estate can be found virtually anywhere where people live or reside, including single-family homes, condos , and vacation houses. Residential real estate investors make profit by collecting rent (or regular payments for rentals for short periods) from tenants, via the appreciation value their property accrues between when they purchase the property and when they decide to sell it, or both.
The investment in residential real estate could take many kinds. It can be as simple as renting out a spare space or as intricate as buying and flipping a home to make a profit.
4. Commercial real estate
Commercial real property is space that is leased or rented by a business. A office building rented by one business as well as a gas station a strip mall with a variety of different businesses, as well as leased restaurants are all instances of commercial real estate. Except for the property in which case each business has to pay rent to the owner of the property.
Real estate for retail and industrial use can fall under the commercial umbrella. Industrial real estate generally refers to properties where products are produced or stored rather than sold. This includes warehouses and factories. Retail space is where people can purchase a product or service, like an online clothing shop. Commercial properties generally have longer leases and may command higher rents than residential properties, which could result in higher and longer-lasting future income for a property owner. But they may also require larger down payments and management costs.
5. Raw land
If you build it, how will they get there? Investors usually buy land to develop either commercial or residential development.
However, purchasing land for development requires some market research, particularly in the case of developing the property yourself. This type of investment is most suited to someone with substantial funds to invest, as well as a solid understanding of all aspects of real estate – building codes, flood plains, zoning regulations and knowing the local commercial and residential rental market.
Which investment in real estate is most suitable on Austin?
If you’re considering the investment of traditional real estate -including commercial or residential properties, taking your time and doing your research doesn’t simply mean making a the down payment. Knowing the market in your area is crucial. If there’s little demand for commercial or residential spaces in your neighborhood or property values begin dropping, the investment can quickly become an obligation.
If you’d rather have more control over investing, REITs and crowdfunding platforms can be a good way to add real estate to your portfolio with no physical property.
Some brokerages offer REITs with a public trading market and mutual funds.