Are you thinking about investing in real estate? Well there are many different options that you could be looking into. Investopedia put together an article discussing some of the different ways that you could be investing your money. Below are some of the examples from the article:
Basic Rental Properties:
This is when a person buys a property and rents it out to a tenant. The landlord is responsible for the mortgage, taxes, and costs. The tenant will then pay the rent that the landlord charges. The landlord typically will charge enough rent to cover all of the costs that he is responsible for. Sometimes, the landlord will even charge more, to recieve a monthly profit. There are, however, downsides to this approach. Sometimes, you will have a tenant that damages the property or doesnt pay rent. Sometimes you will even have a hard time finding a tenant in the first place. It is also importanat to try and find the right property, that people are going to want to rent. Buying a rental property comes with work. You are the landlord of the property and are responsible for keeping your tenants happy and make sure that the space is livable. Keeping tenants renting from you is vital. If you don’t like dealing with all of the work yourself, and you can afford it, you can also hire a property manager who will maintain the property for you.
Real Estate Investment Groups:
These are like small mutual funds for rental properties. In this scenario, a company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company. One investor can own one or more units of the self contained living space but the company that is operating the investment group manages all of the units. Because the company is managing the property, they will likely take a percentage of the monthly rent. Most of the times the rent is pooled to protect against occational vacancies so you will always have enough money to pay motgage regardless of if your unit is empty or not. This may be the safe way to get into real estate investing, however, groups are vulnerable to the same fees that haunt the mutual fund industry.
Real Estate Trading:
Trading is when people buy properties with the intention of holding them for a short period of time. After a few months they will sell the property for a profit. Many people know this to be called “flipping”. Pure property flippers will not put money into a house for improvements and they will still recieve a profit after holding it for a short few months. If the property flipper cannot unload The property they usually do not keeo enough ready cash to pay the mortgage on a property for long term which leads to losses for the trader. There is also a term referred to as a second class property flipper. These people buy a property and renovate them, which adds value to the property. This is a longer term investment.
Real Estate Investment Trusts are when a corporation uses investor money to operate income properties. A corporation must pay out 90% of its taxable profits in the form of dividends to keeo its statas as an REIT. They do this to avoid paying corporate income tax. REITs are a solid investment for stock market investors that want regular income.
There are several ways to invest in real estate. Many more than what is listed above. If you are interested in real estate investing, first, do your research, and talk to a real estate professional and discuss what you best option would be as well as how much work you are willing to put into the investment.
For more information on the different kinds of Real Estate Investments, check out the full article HERE