Apartment rentals, REITs, commercial real estate, land and crowdfunding platforms are all forms of real estate investments.
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There are several types of real estate investments however, the majority fall into the two main categories of physical real estate investments such as land, commercial and residential properties, and various other investment options which don’t require the possession of real estate, such as REITs and crowdfunding platforms.
Investing in traditional, physical property can provide an impressive return on investment, however it also requires more capital in the beginning and has expensive ongoing costs. REITs and crowdfunding platforms offer an easier financial barrier to entry. That means you have the ability to invest in several types of real estate for lower than what it would cost to buy a traditional property. These alternative real estate investments have the added benefit of not having to leave your house or wear a skirt before you can invest.
If you’re interested in investing in real estate, here are five types to look at:
The public market for publicly traded REITs (also known as real-estate investment trusts are firms that have commercial real-estate (think hotels, offices along with malls). You can buy shares of these companies on the stock exchange. By investing in REITs, you are investing in the real estate properties these companies have without having to take on the risk associated with owning real property directly.
REITs have to pay at least 90% of their net income tax-deductible to shareholders each year. Investors can therefore receive lucrative dividends and also benefit from diversifying their portfolios using real estate. REITs that are traded publicly also provide more liquidity than other estate investments. If you need funds, you may sell your shares through the stock exchange. If you’d like to purchase REITs that are traded publicly, you can do so via a brokerage account.
2. Crowdfunding platforms
Real estate crowdfunding platforms offer investors access to real estate investments that may yield high returns, but carry significant risk. Some crowdfunding platforms are open just to accredited investors, being those with a net worth, also known as a joint net worth , with the spouse, of more than $1 million — less the amount of their homeor an annual earnings within the last two years which exceeds $200,000 ($300,000 with the spouse).
“Keep in mindthat the majority of crowdfunding platforms have only a brief history, and have yet to weather an economic slump.”
Others, such as Fundrise and RealtyMogul which offer investors who don’t satisfy those standards — also known as”nonnaccredited investors,” access to investments they wouldn’t otherwise be eligible to invest in. They usually come in the form of REITs that are not traded as well as REITs that aren’t able to offer trading on the exchanges. Since they aren’t publicly traded REITs that are not traded may be extremely in liquid. This means that your funds are invested for at least a few years in the event that you don’t have the ability to pull the money from the investment if you want to use it. Consider that many crowdfunding platforms have a very short history and have still to overcome an economic downturn.
3. Residential real estate
Real estate that is residential is anywhere people reside or go, like single-family homes, condos , and vacation houses. Real estate investors who invest in residential properties earn profits by collecting rent (or regular payments for rentals for short periods) from tenants of their property, due to the appreciation their property will gain between when they buy it and when they let it go, or either.
Investing in residential real estate can take many forms. It could be as easy as renting out a spare room or as difficult as buying and flipping houses to earn a profit.
4. Commercial real estate
Commercial real estate is a space that is leased or rented by a business. An office building rented by a single business, a gas station, the strip mall which houses a number of different businesses, as well as leased restaurants are just a few an example of commercial estate. As long as the company does not own the property itself it is the responsibility of each business to pay rent to the owner of the property.
Real estate for retail and industrial use could fall under the umbrella of commercial. Industrial real estate usually describes properties in which products are manufactured or stored instead of sold, like warehouses and factories. Retail spaces are where customers can purchase a product or servicesuch as clothing stores. Commercial properties are typically able to offer more lease terms and are able to charge more rent than residential properties. This could result in higher and longer-lasting long-term earnings for the property owner. However, they might also require higher down-payments and management costs.
5. Raw land
If you construct it, can they move in? Investors usually buy land to develop either commercial or residential development.
However, purchasing land for development will require a significant amount of market research, particularly in the case of developing the property yourself. This kind of investment is most suited to someone with the capital to invest and a comprehensive understanding of all things real estate–building codes, flood plains, zoning rules and an understanding of the local residential and commercial rental market.
Which real estate investment is the best for Austin?
If you’re considering the investment of traditional real estateincluding commercial or residential properties — being thorough doesn’t just mean coming up with the down payment. Understanding the local market is essential. If there’s not much demand for residential or commercial space in your region or the value of your property starts declining, your investment could quickly become an obligation.
If you’d rather have more control over investment decisions, REITs as well as crowdfunding platforms offer a way to add real estate to your portfolio, but without the need to own physical property.
Certain brokerages offer REITs with a public trading market and mutual funds.