So you’ve decided that you want to invest in real estate? Congrats! What type of investment do you want to venture into? We’ve compiled this list to help you get an idea of various types of investments and what you need to know about each category.
Rental properties are one of the most common forms of real estate investing. In these situations, an individual buys a property and then rents that property out to a tenant. Ultimately, the owner is responsible for paying the expenses for the home. The landlord charges rent to pay for such expenses and make a profit. Generally speaking, owning rental property is a great way to own an appreciating asset while collecting cash flow.
Flipping property is a different process than holding and renting property. In this instance, the purchaser looks for undervalued property to sell at a later date for profit. These individuals look to hold onto a property for a few months at maximum. Some flippers seek appreciation and hope to make a profit while leaving the home as it was when purchased. Others will buy a property and make renovations to the home in hopes of adding value and increasing profit. The main risk in this type of real estate investing is not being able to sell the property. Most flippers do not hold enough cash on-hand to hold the property for extended periods of time, which can leave them strapped for cash.
Real Estate Investment Trusts
Real Estate Investment Trusts (REITs) are publicly traded instruments that are sold on major exchanges, similar to stocks. REITs utilize investors’ funds to purchase and operate income properties. REITs are a solid investment for investors who are seeking income and for those who would like exposure to malls or office buildings. In addition, these investments are highly liquid, and thus, do not carry the same risk as other types of real estate investments.
Real Estate Investment Groups
This type of real estate investment consists of a group of individuals who build or buy properties and sell them to investors as rental properties. This is different than purchasing your own rental property, because the investment group typically helps you find tenants, maintaIn facilitates , and take care of other responsibilities in exchange for a fee. Investment groups are known as the mutual funds of the real estate world, because you can reap the benefits of owning rental property without having to manage them.