Ways to Invest in Real Estate

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