Investment strategy comes in various forms. With real estate, buying and renting out or selling a home or structure is regarded as an investment strategy because the end goal is to receive profit. Real estate investment is a lucrative and satisfying field anyone can venture into, as it allows investors to employ leverage to buy their property. This varies from investment in bonds and stocks, where you need the full amount to make money.
This post takes you on a real estate journey. It introduces you to real estate investing and the many profitable ways you can go about it.
Crowdfunding
Real estate crowdfunding is similar to other types of crowdfunding we know about. This is an investment strategy in which many individuals offer capital to enterprises. Real estate crowdfunding is usually done via online platforms featuring interested investors and real estate developers. In exchange for investors' money, real estate developers and enterprises offer debt or equity in a development project, which can migrate into monthly or quarterly distributions of wealth in successful cases.
It is vital to note that crowdfunding sites aren't always accessible by everyone. They are typically made available to highly experienced investment individuals and accredited investors. Like every other form of investment, crowdfunding comes with risks. Their major downside is how difficult they are to sell. They're not as liquid as investment elements such as bonds and stocks. Once an investment is made, you might have a time horizon of up to 5 years before going to resell.
Real estate investment trusts
Also known as REITs, real estate investment trusts are ideal for investors who want to invest in real estate immediately, with as few resources as possible. With REITs, funds are raised through issuing bonds and sharing stocks. All proceeds from this sale are then used to purchase real estate assets such as office buildings, shopping malls, warehouses, and apartment buildings.
One major feature of REITs is their dividends, which are their after-tax profits. As opposed to keeping these profits, they are mandated by law to hand them over to investors. From their ease of acquisition to the provision of dividends, REITs take the stress out of owning any form of real estate. With this investment, you only need to put in your money and sit back while the dividends roll in.
Invest in your own home
One of the most common ways people invest in real estate is through primary residence investment. This is done when you take out a mortgage and make gradual yet consistent payments to your financial institutions to build home ownership. When done strategically, you can cash in on the equity when you decide to sell your home. Professional services such as Syndication Attorneys help you navigate your way round the paperwork that comes with buying a home. It is imperative you seek professional help from the likes of attorneys, contractors and brokers, before making a money commitment.
Rental properties
If you're an individual who is into the do-it-yourself part of things, you might consider going into rental properties as an investment. Owning rental properties is a great opportunity as it equips you with renovation skills and management skills, especially when it comes to relating with your tenants. Rental properties provide you with a regular income, and there are several tax-deductible associated expenses you can enjoy.
The downside to rental properties is that you'll need a huge amount of capital to start, as financing is always demanded upfront for maintenance. Another disadvantage of rental properties is that managing tenants can be overwhelming and tedious. You never know when your tenants might decide to leave, which can pose the issue of reduced income.
House flipping
Certain individuals have an impressive experience in real estate valuation, renovation, and marketing. These individuals are great options for house flipping, which is another great way to make money in real estate investment. To succeed as a house flipping, you need a lot of ready capital and the ability to undertake or manage repairs whenever required. Real estate flippers differ greatly from individuals who buy and rent homes. The former love to make money selling undervalued properties and reselling them in a short period. The latter rather search for high-profit buildings and look to resell them for an even higher profit.
The secret to house flipping is to look out for houses with a high intrinsic value, meaning they won't require any serious alterations. The fewer alterations that need to be made, the higher you can resell a house.
Investing in tangible property is a great way to gain long-term returns that have nothing to do with the stock market. Even though this system offers some risks and downsides, it is still one of the best choices for people with limited resources and those who don't require a primary residence.
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