Real estate investment is an investment opportunity that allows you to hold a financial interest in a tangible asset. Real estate investing provides numerous avenues for potential returns. For example, investors can potentially leverage real estate as an additional source of income by leasing real estate. Property investments are still risky, as real estate values can drop, natural disasters can strike, and units can stand vacant. Still, it’s a potentially great way to diversify your portfolio beyond bonds and stocks.
Buying real estate
Buying real estate is almost as straightforward as it sounds. It involves a contract or legal deed and ownership of a specific piece of land or a building. Real estate investors often purchase property in areas expected to appreciate, thereby allowing them to earn on their initial payment if that expectation is met.
There are numerous options and property types to consider when purchasing real estate.
Buying your own home
Buying your own home is one of the most popular ways to invest in property. It’s convenient (where you live, after all), often more cost-effective than renting, and the owner can control how to maintain or eventually sell the real estate. Like all markets, the housing market can rise and fall, and various factors can significantly influence sales prices. This is why it’s essential to get advice before buying a home. It would help if you researched neighborhoods, markets, and the overall costs incurred to own and maintain the property, as purchasing a personal residence is generally a long-term investment.
House flipping, buying real estate to fix it up and sell it at a higher price later, is a popular option for people looking to make a quick profit from a property. It’s a hands-on project, and it can be one of the fastest ways to earn on your real estate investment. It would help if you contracted it out for an added expense and have ample credit to purchase and renovate the property. While house-flipping makes for great reality TV, it’s never guaranteed that a renovated property will flip at a higher price.
Property for rent
Buying a property to rent it out is one of the most popular ways to earn passive or semi-passive income. It allows investors to own a property and charge a premium market rate for others to live or work in that space. This covers property-related expenses and can be a great way to earn while the property appreciates. The downside, however, is that renters will use the property, and you can not find suitable tenants easily. Further, if the market is soft, rooms may sit empty. Owners should plan for additional expenses like repairs, insurance, landlord or management fees, and other costs that come with rentals.
A vacation property can be a great way to invest. You can earn income on that property if it appreciates over time. You can also make rentals, which can be priced at a premium depending on the vacation home’s location. On paper, this can seem like a win-win situation: your money goes into a home that appreciates in value, and you can rent it out, plus you get a sweet spot for holidays.
Commercial properties are retail buildings, offices, apartment complexes, mixed-use, and industrial buildings. Each building type comes with different considerations. Investments in commercial real estate can have significant earning potential and typically have much higher returns than investments in single-family homes. However, unlike a home, commercial real estate may involve multiple leases or contracts with vendors, complex maintenance issues, and public safety requirements. This is often very expensive for both investment and maintenance.
>>> Read more: 4 type of real estate transactions easy to lose money
Investing without buying property
If you aren’t interested in buying property or don’t have the capital to put into a home, you can still invest in real estate. There are several different ways to invest without ever actually owning property.
Real estate investment trusts (REITs)
REITs are companies that finance and often operate income-producing commercial real estate. There are two main types of REITs: Equity REITs and mortgage REITs. REITs can be publicly traded or privately owned. Investors can buy shares and get paid dividend distributions based on the amount they invested. According to U.S. federal income tax, REITs generally payout equal to at least 90% of their taxable income to shareholders. By putting money into the fund, REITs offer investors an opportunity to earn on a diversified portfolio managed and run by the trust.
Real estate mutual funds
Real estate mutual funds are a collection of professionally managed pooled investments that go towards various vehicles, including stocks and bonds. They offer a reasonably low-risk, low-cost, and sufficiently safe starting point. Real estate mutual funds tend to be more diversified than REITs, as they typically focus on publicly traded companies. Unlike REITs, with mutual funds, you are investing in the company managing the fund instead of the portfolio itself.
Become a property agent
Property agents earn revenue for each property they sell or rent. Depending on the market, their commissions can be massive, but they need licenses to operate like appraisers. Agents can also work for brokers, which take fees from commissions for brokering the property. Starting a brokerage firm is another option, but it can be expensive and requires training and licenses to operate.
Become an appraiser
Property appraisers estimate the market value of properties. Becoming an appraiser can start a great career and give you insight into the broader market. Appraisers must get certified at the state and national level, but gaining the knowledge needed to work the market can pay off in a big way.
Online real estate investment platforms
Online real estate investment platforms are crowdfunding’s answer to real estate investing. You can contribute a small amount of funding to a larger pool backing a project. Like investing in shares, or properties on GIGEX, you will be able to choose investment portfolios and receive a certificate of partial ownership when confirming your investment on the platform.
Like any other type of investment activity, you must conduct in-depth research and pay attention to market activity as much as possible. An excellent place to start your due diligence is GIGEX, which focuses on tokenizing real-world assets.
It is expected that, in the second quarter of 2022, GIGEX will launch the first real estate project with carefully appraised information publicly disclosed to platform participants. Sign up for an experienced account here: https://gigex.io/ and join our community to keep up to date with the latest news.
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