Apartment rentals REITs Land and crowdfunding platforms are all forms of real estate investment.
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There are various kinds of real estate investments, but most fall into two types: physical estate investments like land residential and commercial properties, and other investments which don’t require the possession of real estate, such as crowdfunding platforms and REITs.
A traditional investment in physical real estate can offer the highest return, but it is also more expensive upfront , and may have an ongoing cost that is high. These crowdfunding platforms and REITs have less of a financial barrier to entry. That means you can invest in different types of real estate at lesser than it would to purchase a single traditional property. These alternative real estate investments have the added benefit of not needing to leave the house or wear a skirt before you can invest.
If you’re looking to invest in real estate, here are five types to think about:
The public market for publicly traded REITs that are publicly traded also known as real property investment trusts are companies that manage commercial real property (think hotels, offices along with malls). You can invest in shares of these companies on the stock exchange. When you invest in REITs, you are investing in the property these companies own and do not have the risks involved with owning real property directly.
REITs are required by law to return at most 90% of the tax-deductible earnings to shareholders each year. Investors can therefore receive attractive dividends as well as diversifying their portfolios using real estate. Publicly traded REITs also have greater liquidity than other estate investments: If you are suddenly in need of some cash, you can sell your shares through the stock exchange. If you’d like to buy REITs listed on the stock exchange it is possible to do this via the use of a broker account.
2. Platforms for crowdfunding
Real estate crowdfunding platforms offer investors access to real estate investments which could be lucrative, but involve significant risk. Certain crowdfunding platforms are open just to accredited investors identified as individuals who have a net worth, or the combined net worth of an individual spouse, greater than $1 million — less the value of their home -or a yearly income in each of the last two years exceeding $200,000 ($300,000 with a spouse).
“Keep in mindthat a lot of crowdfunding platforms have a short time-line, and they have yet to go through an economic slump.”
However, others, such as Fundrise and RealtyMogul provide investors who aren’t able to meet the thresholds — referred to as”nonnaccredited” investors access to investment opportunities they would not otherwise be allowed to invest in. These investments often come in the form of nontraded REITs or REITs that do not trade on the stock exchange. Because they’re not publicly traded REITs that aren’t traded can be very liquid, which means that the funds you invest for at least several years and you might not have the option of pulling your cash out of the investment if you need it. Consider that many crowdfunding platforms have a very short experience, and are yet to experience an economic slump.
3. Residential real estate
Residential real estate can be found virtually everywhere that people live and reside, such as single family condominiums, homes, and vacation houses. Residential real estate investors earn cash by taking rent (or regular rent for short-term rentals) from tenants who live in the property, by the appreciation value their property will gain between when they buy it and when they let it go, or either.
The investment in residential real estate can take many shapes. It can be as simple as renting out an empty room or as complicated as buying and flipping a home to make profits.
4. Commercial real estate
Commercial real estate is space that is leased or rent by a company. An office building rented by a single business as well as a gas station an outlet mall that houses several distinct businesses, and restaurants leased are all kinds of examples of commercial property. In the event that the business doesn’t own the property it is the responsibility of each business to pay rent to the owner of the property.
Real estate for retail and industrial use are often included under the umbrella of commercial. Industrial real estate generally refers to the properties where products are created or stored rather than sold. This includes factories and warehouses. Retail spaces are where people can purchase a product or service, for example, an apparel store. Commercial properties typically have longer leases and may command higher rents than residential properties, which could mean a higher and more stable annual income for the property owner. But they may also require higher down-payments and management expenses.
5. Raw land
If you build it, will people 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, particularly for those who plan to develop the land yourself. This type of investment is most suitable for someone who has substantial funds to invest, as well as a solid comprehension of everything that is real estate–building codes, flood plains, zoning rules — in addition to knowing the local residential and commercial rental markets.
Which investment in real estate is the most profitable on El Paso?
If you’re thinking of purchasing traditional property- like residential or commercial properties, doing your due diligence doesn’t just mean coming up with an initial down payment. Knowing your local market is important. If there’s not much demand for commercial or residential space in your area, or property values start decreasing, your investment could quickly become one of the biggest burdens.
If you’d rather have more control over investing, REITs and crowdfunding platforms provide a simple way to add real estate to your portfolio with no physical property.
Certain brokerages offer REITs that are publicly traded and mutual funds.