Investing in real estate – 4 investment options

Real estate investing is satisfying and lucrative when done right. It can help you diversify your investment portfolio and generate additional income. Many of the real estate investments do not require direct dealings with tenants. You can also buy a property by paying just a fraction of the total price and then making up the balance and interest over time. Here are four real estate investment options.

rental properties

Investing in rental housing can be great, especially for someone with renovation and home improvement skills who have the fortitude to handle renters.

advantages

• Provides regular income

• Properties can appreciate

• You can optimize capital through leverage

• Many of the expenses are tax deductible

Disadvantages

• Managing tenants can be tedious

• Vacancies can reduce income

• Renters may damage property

turn house

You can buy undervalued properties that need a bit of modernizing, renovate them cheaply, and then resell them for a profit. However, house flipping comes with some risks. First, your repair cost estimate must be accurate, which is not easy. Second, the longer the property is in your hands, the less money you are likely to make paying a mortgage without generating income.

advantages

• Only binds your capital in the short term

• Possible quick returns

Disadvantages

• A hot market may cool down unexpectedly

• Requires in-depth knowledge of the industry

Real Estate Investment Trusts (REITs)

REITs are traded similarly to stocks on major stock exchanges. A REIT is formed when a trust/company uses investors’ money to purchase and manage income-generating real estate. To maintain REIT status, 90 percent of the trust/corporation’s taxable income must be paid out in dividends. REITs can allow you to invest in non-residential properties, such as office buildings and shopping malls, that may not be available to purchase outright.

advantages

• High liquidity as it can be traded

• They are essentially dividend stocks

• The holdings are usually cash-effective long-term leases

Disadvantages

• Does not offer the leverage typically available with traditional rental property investments

online platforms

These online platforms match investors with developers who need capital for their real estate projects, either through equity or debt.

advantages

• You have the option to invest in a single project or in multiple projects

• Geographical diversification

Disadvantages

• Typically illiquid and speculative

• Administrative Fees

Conclusion

The four real estate investment options available to investors include rental properties, house flipping, REITs and online platforms. Ultimately, the ideal real estate investment opportunities are those that align with your investment goals.