Real estate is one of the most favored investments because it has many advantages if you tread carefully. But understanding all the various investment options can be a little daunting when you are just starting with real estate investments.
Investors need to know about various property types, including residential, commercial, new construction, raw land, REITs, and crowdfunding platforms. Investors should also weigh the distinct benefits and drawbacks of each of these types. Let’s examine each of the available choices.
Residential Real Estate
The most well-known type of property investment is residential real estate. You may be aware of numerous residential real estate investment strategies, ranging from accessory dwelling units (ADUs) to micro-flipping.
Investments in residential real estate are typically active, meaning you will probably need to make sizeable financial and labor contributions. However, they can generate sizable profits and ongoing cash flow.
Commercial Real Estate
Commercial real estate investments include hotels, distribution centers, office buildings, and retail outlets. These real estate investments are frequently regarded as active, and they entail owning and renting out space to a company. Like residential real estate, it also allows you to generate additional income by charging rent or selling the asset as its value increases.
New Construction and Raw Land
Two different real estate investments that can diversify a portfolio of investors are new construction and raw land. New construction is a common investment strategy in markets that are expanding quickly. That being said, there aren’t many differences between old and new construction, since buildings in both are already erected. Raw land is any undeveloped area that is up for sale, and it is most desirable in regions with strong growth prospects.
Although investing in new construction and raw land may be unfamiliar to many investors, these holdings can offer lucrative returns. Real estate investors have a unique opportunity for new construction and raw land, regardless of whether they want to profit from a prolonged buy-and-hold strategy or develop a property from scratch.
Real Estate Investment Trusts (REITs)
Businesses that own various commercial properties, such as shops, hotels, malls, offices, or restaurants are known as real estate investment trusts or REITs. Stocks of such REITs are available for purchase on the stock market. A REIT allows you to invest in real estate without taking on the additional risk of possessing the actual property.
REITs are required to distribute 90% of their annual taxable income to shareholders. This allows investors to diversify their portfolios while also receiving dividends. In contrast to other real estate investment types, publicly listed REITs have flexible liquidity. When you require urgent cash, you can sell your company shares on the stock exchange.
Crowdfunding Platforms
Crowdfunding platforms give investors access to high-yield assets typically only available to the wealthy. While this property investment makes it simple for investors to find assets, it also carries significant risk. Platforms for crowdfunding typically only accept accredited investors or people with high net worth. Non-accredited investors may also have access to some websites.
Non-traded REITs, or those not listed on a stock exchange, are the main types of property investments available through crowdfunding platforms. Regarding non-traded REITs, your money might be invested for several years without any possible withdrawal when needed.
For investors prepared to put in the effort, various property types can produce high-profit margins. However, many investors may wonder about the best property investment because so many options are available. The best kind of investment vehicle will depend on various factors, so investors should be cautious not to reject any option when looking for potential deals.
