Real
estate investment is one of the safest investment where appreciation is mostly
guaranteed. That is why, investing in real estate has become increasingly
popular and has become a common investment vehicle. Although the real estate
market has plenty of opportunities for making big gains, buying and owning real
estate is a lot more. In this article, we'll explore different options to
invest in real estate.
A. Basic
Rental Properties
This is an investment as old as the practice of land ownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Furthermore, the property may also have appreciated in value over the course of the mortgage, leaving the landlord with a more valuable asset.
There are, of course, blemishes on the face
of what seems like an ideal investment. You can end up with a bad tenant who
damages the property or, worse still, end up having no tenant at all. This
leaves you with a negative monthly cash flow, meaning that you might have to
scramble to cover your mortgage payments. There is also the matter of finding
the right property; you will want to pick an area where vacancy rates are low
and choose a place that people will want to rent.
B. Real
Estate Investment Groups
Real
estate investment groups are sort of like small mutual funds for rental
properties. If you want to own a rental property, but don't want the hassle of
being a landlord, a real estate investment group may be the solution for you. A
company will buy or build a set of apartment blocks or condos and then allow
investors to buy them through the company, thus joining the group. A single
investor can own one or multiple units of self-contained living space, but the
company operating the investment group collectively manages all the units,
taking care of maintenance, advertising vacant units and interviewing tenants.
In exchange for this management, the company takes a percentage of the monthly
rent.
C. Real
Estate Trading
This is
the wild side of real estate investment. Like the day traders who are leagues
away from a buy-and-hold investor, the real estate traders are an entirely
different breed from the buy-and-rent landlords. Real estate traders buy
properties with the intention of holding them for a short period of time, often
no more than three to four months, where upon they hope to sell them for a
profit. This technique is also called “flipping properties” and is based on
buying properties that are either significantly undervalued or are in a very hot
market.
D. REITs
A Real
Estate Investment Trust (REIT) is created when a corporation (or trust) uses
investor’s money to purchase and operate income properties. REITs are bought
and sold on the major exchanges, just like any other stock. A corporation must
pay out 90% of its taxable profits in the form of dividends, to keep its status
as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a
regular company would be taxed its profits and then have to decide whether or
not to distribute its after-tax profits as dividends.
Much like regular dividend-paying stocks,
REITs are a solid investment for stock market investors that want regular
income. In comparison to the aforementioned types of real estate investment,
REITs allow investors into non-residential investments such as malls, or office
buildings, and are highly liquid. In other words, you won't need a realtor to
help you cash out your investment.
Conclusion: We have looked at several types of real estate
investment. As with any investment, there is much potential with real estate,
but this does not mean that it is an assured gain. Make careful choices and
weigh out the costs and benefits of your actions, before diving in.
Reference:
http://investfourmore.com/2013/10/the-top-nine-ways-to-make-money-investing-in-real-estate/
http://beginnersinvest.about.com/od/realestate/a/how-to-invest-in-real-estate.htm
https://en.wikipedia.org/wiki/Real_estate_investing
No comments :
Post a Comment