Real estate is more than just a home or an office, it is also an investment option. Unlike stocks and bonds, they are a little complicated to buy or sell. But that doesn’t make them any less of an attractive option, especially considering their odds of giving a high return on investments.
There are plenty of opportunities when it comes to real estate investments, it’s just that people are usually unaware of this. Angus Reed – International Real Estate Developer, told us told us the number of ways in which one can invest in real estate.
Rental Properties
It is one of the oldest practice of real estate investment in which the landlord buys a property and rent it out to a tenant. The landlord is paid a monthly rent by the tenant which is agreed upon by both the parties. The charges such as maintenance, repairs and mortgage are paid by the landlord.
The rent is decided in a way that it covers all the above-stated charges. Once the mortgage has been paid, the majority of the rent becomes a profit. But all this is not as simple as it sounds, on the downside, you might end up with a bad tenant who damages your property. And the worst case scenario would be you end up having no tenant at all.
Real Estate Investment Groups
This is like investing in a mutual fund but for rental properties. This investment tool saves you from the hassle of going through all the paperwork. A real estate investment group is an organization that buys some property from a developer and rents them. An individual in this group can buy one or more units. The upside of this is, the property is maintained and managed by the organization which also charges a part of the rent in return for its service. The investors also pool a portion of their rent to make up for any vacancies. This enables the owner of the vacant unit to get enough money that he can pay the mortgage installment.
This sounds safe way to invest in a property but proper research is the key. You must check what kind of organization it is and what charges does it take.
Real Estate Trading
These are just the opposite of buy and rent type investment and is more of a stock/bond trading. Real estate traders buy properties with an intention that they won’t hold it for long. They usually intend to sell them within 4 to 6 months. They are also called flippers.
Real estate trading works well only in a hot market. The flipper assumes that the prices of the property are going to get higher in a short time and hence investment for a short term is a good option. They can’t pay the mortgage for long and if the property is not sold in a few months or does not give the intended profit, the flipper might have to incur losses. They generally do not believe in renovation, but the second class of flippers can also exist who do. The latter believes in buying a property that needs repairs at a reasonable price, adding value to it and selling it at high prices.
Real Estate Investment Trust
These are very much like stocks and bonds since they are traded on stock markets. REIT are corporations (or trusts) that buy and sell a property with the investor’s money and distributes the profit earned to its investors as dividends.
These firms need to pay 90% of their taxable profits to its investors. These firms also trade non-residential properties that tend to be more liquid than the residential ones. These are the latest and the most attractive of the real estate investment options.
These are the four major types of investment options available for someone who wants to invest in the real estate market. None of these investments guarantees assured gains, it is up to you to decide and figure out which one would be the best. If you want to invest in one of these, it is recommended that you go through the downsides of the options too.
