If you’ve been searching for a guide on real estate investment opportunities, this is the perfect article for you. Purchasing real estate is a good investment option, but you need the correct information to navigate the system and make the right choice.
Hence, this article will let you in on what real estate investing is, who should invest in real estate, the property investment types, and reasons to invest in real estate.
What Is Real Estate Investing?
Real estate investing is simply a real estate purchase. What then is real estate? Real estate is primarily any land and property connected to the ground.
Real estate includes anything artificial or natural in the land, including buildings. Therefore, investing in real estate involves buying land with any artificial additions like a home.
Who Should Invest in Real Estate?
1. Anyone Who Wants to Start Investing
Real estate is an excellent place to begin if you’re yet to make any investments. As a beginner, you can start investing in real estate by purchasing a multi-unit property, stay in one unit, and put the rest on rent.
2. Investors Looking to Diversify
If you’re already an investor in the stock market but want to diversify, investing in real estate is a good option. Diversifying your investment reduces the blow if the stock market crashes.
3. Investors Looking for Cash Flow
There’s no regular cash flow in most investments. After investing in the stock market, you don’t have access to your money until you sell the assets like stocks. Investing in buy-and-hold real estate gives you a monthly cash flow when you rent your property.
Types of Real Estate Investment Opportunities
Generally, most real estate investment opportunities are in two categories: active or passive. Active investments will require your time and sometimes physical labor in addition to money. In contrast, passive investments are methods of real estate investing that usually don’t require you to manage or own the property personally.
Investing in real estate funds, crowdfunding platforms, and REITs (Real estate investment trusts) are passive. Managing residential rental properties and flipping houses are examples of active investing. Active real estate investing can provide a high return, but it has a high ongoing cost and requires more upfront money.
Contrarily, passive real estate investing like crowdfunding platforms and REITs have a lesser financial barrier for entry and can be done from the comfort of your house. Here are the real estate investment types to consider.
1. Crowdfunding
Real estate crowdfunding is a system that offers investors available real estate investments that’ll produce a high return on investments. Crowdfunding platforms allow investors to band together online to contribute funds and make investments they’d otherwise not make on their own.
This method of real estate investing is passive and requires much less money upfront. Various crowdfunding platforms are accessible to accredited investors only. An accredited investor has a net worth of above $1 million, minus their home value. Or an annual income that exceeds $200,000 in each of the last two years.
But other crowdfunding platforms offer non-accredited investors opportunities they usually would be unable to access. Holdfolio offers accredited investor opportunities that help generate considerable returns and diversify investor’s portfolios.
2. REITs Investing
For new investors, Real Estate Investment Trusts (REITs) are a good start. REITs are companies that supervise several real estate investments and operate as trusts. Instead of owning properties yourself, you can invest in a REIT and profit from the properties the company manages.
Some REITs specialize in commercial properties like offices, hospitals, and malls. REITs are a good option if you want to invest in commercial real estate but don’t have the capital to own a property. One significant advantage of REIT investing is that it provides you with extra cash without managing, seeing, or personally owning a property.
3. Residential Real Estate
Residential real estate is a popular property investment type. There are many residential real estate types, and they fall under active real estate investing.
Residential property investments typically require significant labor and monetary contribution from you and they include:
- Long-term rental property
- Vacation rental
- Flipping and micro flipping
- ADU (Accessory dwelling units)
A long-term rental property is a real estate you purchase to rent out to tenants and can be a multifamily home or a single-family house. Also, a vacation rental is a property usually in an area with tourists. The property is rented to visitors who reside there for a short time.
4. Commercial Real Estate
Commercial real estate is property investments that are typically non-residential. Commercial property investment examples include offices, hotels, retail stores, and warehouses. The retail and industrial real estate falls under the commercial umbrella.
Industrial real estate are properties used for production or housing products like factories and warehouses. Retail real estate is a space for the purchase of a product or service by a customer.
Commercial properties gain more rent than residential properties and usually have longer leases. But they may also demand property management expenses and higher down payments.
Is Real Estate a Good Investment in 2021?
Yes. Below are why real estate is a profitable investment.
1. Real Estate is a Tangible Asset
Real estate is a visible, tangible, and valuable asset. Irrespective of the increase or decrease in value throughout the year, a tangible asset is worth something. If you need to, you can quickly sell the property for a profit.
2. Real Estate Usually Appreciates in Value
Long-term property investments usually appreciate over time. Many times, land and buildings increase in value, increasing the worth of your investment.
You can get a greater return on your investment when you improve a rental property or buy a low-value property and repair it than when natural appreciation occurs.
3. Real Estate Provides Cash Flow
You can earn monthly cash flow if you invest in a buy-and-hold property and rent it out. Real estate can be a passive investment depending on property management.
Conclusion
The real estate market is constantly changing. When it comes to choosing investment opportunities, real estate investors have options that aren’t all physical properties. There are some property investment options include REITs, crowdfunding platforms, residential and commercial real estate.
REITs offer real estate exposure without having to own, finance, or operate properties. Also, real estate is a good investment since it’s a tangible asset, usually increasing value and providing cash flow.