Different Types of Real Estate Investments
There are a number of different ways to invest in real estate. Generally, they fall into two categories: buying physical real estate like land and buildings, and other forms of real estate investing that don’t require owning physical property–like REITs and Crowdfunding or Syndication.
Choosing to invest in physical property can provide ongoing cash flow plus gain in value, but it typically requires more funding upfront and involves ongoing expenses. REITs and Crowdfunding methods are less involved–more like picking a stock–and often don’t require the investor to be personally involved after the transaction is made.
Whatever real estate method you choose, it’s important to dig deep to know WHAT YOU NEED TO KNOW. It’s of course wise to consult with a reputable financial advisor, and just as important to invest in your own real estate investing education and training.
Here Are the Most Common Forms of Real Estate Investments:
- Residential Real Estate. Many of us are already invested in this type: we own a home, townhouse or condo. It’s anywhere that people live or stay. Residential real estate investors make money from short or long-term rental of their property, and the appreciated value their property accrues between buying and selling of that property. There is a variety of possible strategies used when buying residential real estate: buy-and-hold, fix-and-flip, short term rentals, multi-family investing and more.
- Commercial Real Estate. This type of real estate investment involves renting or leasing space to a business–-beauty shop, restaurant, service station, etc. Commercial real estate includes industrial, retail and office space. Benefits of investing here include generally longer leases and higher rent, but down payments and property management may also be greater. Multifamily falls into commercial when a building has 5 units or more. (Residential and commercial real estate investing in rural areas can offer serious benefits, but research the area carefully and be aware of the potential risks.)
- Land. Investors who choose to acquire raw land typically plan to develop that land into residential or commercial space. It’s important to know about and understand the real estate market in the region you’re targeting, as well as construction rules, building codes, zoning and more. Real estate investing in rural areas often involves land acquisition and development.
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More Common Forms of Real Estate Investments:
- REITs. Real estate investment trusts–REITs–are companies that own commercial real estate. Investing in a REIT means you are buying shares in that company; you are not a property owner. Many brokerage firms sell REITs to investors who want to diversify with a real estate investment. REITs offer the advantage of more liquidity than owning physical property. It depends on the REIT, but you may be able to sell your shares as you like. In addition, you can get into this method of real estate investing with a smaller amount of capital than other forms.
- Crowdfunding. Real estate crowdfunding offers access to high return investments that also carry higher risk. Some crowdfunding opportunities are available only to high net worth individuals–”accredited investors”–while others accept “non-accredited” investors who don’t meet accreditation minimums.
- Syndication. Syndication investing is generally for the more experienced investor who has a higher net worth. Some syndications require “accreditation” to gain access to syndication deals. While with REITs you are buying shares of a company, when you invest in a syndication you participate in a group investment in a specific property. You know exactly what and where the property is. Along with other partners, you will own the entity that holds the assets of that property.
How to Decide Which Form of Real Estate Investing is Right for You
First, consult with your financial planner and tax advisor. Is any one type of real estate investing right for you, your family, your current circumstances?
Next, seek out education and training with a reputable organization with a proven system and program that will help you figure out what fits you and what doesn’t. One thing you will learn early in LeAnn’s Proven Profit Formula Coaching Program is what type and strategy of real estate investing is right for you and your unique circumstances.
Then ask yourself a few important questions, and be totally honest with yourself.
- Do you have the money needed to pursue any of these forms of real estate investing?
- Are you willing to make a financial investment in your own education? This is not unlike getting the degree that set you up in your career.
- Do you want to be a hands-on investor, or just put in the initial investing dough and wait for the money to come in?
- If you want to be hands-on, what are your skills: construction and rehab know-how, managing and interacting with contractors and tenants, working with a team to keep things going, have a good financial head but not a people person, a good negotiator. It’s important to face the facts of what type of person you are and what you can and can’t do.
- Do you plan to give up your day job and hope to make it financially with one of these real estate investing methods?
- Is your spouse, partner, family on-board with your decision to invest? Will they agree to the time and focus you need to invest if you get involved in some types of real estate investing?
- Are you ready not only for the gains but for the risks of losing money in this particular type of real estate investing?
- If you want this to be your business or means of income then you MUST get a real estate investment mentor or real estate investment coach to help get you started and to teach you the RIGHT steps to grow a business. You wouldn’t start a business, invest money and HOPE to make it, would you? So many people think they can learn this in online classes but the real day to day operation is what makes the money along with choosing the right property in the right location. There is a science to investing in real estate: Get help!
- Make sure you have the right Realtor too, someone who understands investing along with the numbers and formulas. Buying property as an investment is quite different from buying or selling your own home. Most Realtors are not trained in investment property, so find one who knows this side of the business.
- Do you understand the components of investing in real estate. Are you a master at real estate investing? If not…get help with real estate investing classes, a real estate investing coach or mentor and the right knowledge in the right sequence like the Proven Profit Formula Coaching Program. We will teach you the fundamentals AND be there with real estate investment advice precisely at the moment you need it with our weekly group coaching.
- Do you wonder about real estate investing in rural areas? It can be very profitable BUT there are many risks also. We teach you how to choose a market, do the proper research and acquire property that will cash flow.
- What forms of real estate investing will be right for you? The strategy you choose does depend on the capital you have available to begin investing. Also, it’s best to match your skills and interests to your strategy. Is it buy and hold investing, short term rentals or multifamily investing that will work for you?
Book a free strategy session now at www.leannriley.com to figure out if this is the right fit for you to get started as a real estate investor.