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What are all the types of real estate investing?

What are all the types of real estate investing?

Real Estate

When it comes to real estate investing, how do successful investors know which property to choose? Is it better to invest in a single-family, or are multi-family units more lucrative? As an investor, you can’t really make assumptions. You need to understand the real estate market and be able to predict future trends, which include expected vacancy rates, demand, and overall concessions in surrounding properties.

Investment Options

Before moving forward, you need to understand the different types of investment options. Some of the most common ones include:

  • Flipping houses
  • Rental properties
  • REIT investing
  • Mutual Funds

Now that you know your options, let’s delve a little deeper into each one.

House Flipping

Even though it can be tricky to predict the market, house flipping is one of the most profitable investments you can make. It involves buying a property, at a low price or at auction, that needs repair. You then make the necessary repairs and either rent it out or resell it. The key to successfully flipping houses is keeping your initial investment and renovation costs as low as possible. Oftentimes, homes that are in foreclosure can also be flipped. It just depends on the amount you put down and the overall cost of renovating the property.

Rental Properties

Rental properties are always a hot commodity. If you choose this route, you can invest in properties and then rent it out to suitable candidates. Most rental properties are rented on a yearly basis with an option to renew. However, you can opt for longer periods of time. It’s also important to note that shorter Airbnb rentals are also popular as well. Regardless of which route you go, you are responsible for the maintenance, repairs and pay the property taxes. Depending on the lease terms, you may or may have to pay the utilities as well. It would depend on the terms of the lease. As you continue to invest and start making a profit, you may eventually be able to sell certain properties for more than you originally paid for it.

Real Estate Brokerage

You may not think about it, but why not invest in yourself? Especially if you are a people person with an ability to learn quickly. Furthermore, if you can network, you are off to the races. Nowadays with Compass, anyone can be a broker. Becoming a broker is a much more affordable way for someone to enter real estate. The relevance of marketing for realtors stems from the fact that it provides a platform for agents to advertise and promote their services, as well as to collect potential leads in the real estate industry.

REITs

If you’re not in a position to manage a rental property, or you don’t have the available funds for a down payment, you could consider REITs. Real estate investment trusts are a relatively safe and easy way for new investors to get started, to simplify the process, REITs are traded trusts that own and run rental properties. They can be either residential, commercial, or industrial structures. In general, investors can yield a high dividend with REITs, usually up to 90%. In addition, the IRS considers REITs a pass-through entity or a liquid asset. As such, you won’t have to pay corporate taxes if you follow all the rules when initially investing.

Mutual Funds

Even though real estate mutual funds function like REITs, they usually don’t pay dividends, so they grow significantly faster. For investors new to the real estate market. Real estate mutual funds represent a great way to get one’s feet wet without high risk.

Real Estate Investment Groups

REIGs buy and subsequently manage properties. They may also sell them off in parts to qualified investors. If a REIG buys an apartment complex or condominium community, they may then sell a certain number of shares. Note, the original purchaser manages the properties. They also get to keep a percentage of the rent each month. In these types of situations, it’s not uncommon for investors to put their money together to pay off the rents in unoccupied units.

How to Get Started

You need to do your research prior to making financial decisions. Even though some deals might seem like they’re too good to be true. In addition to saving money for financial security, you need to have the right mindset and an investment strategy. While each option listed above can yield a high return, it’s still a good idea to research all the possibilities prior to laying your money on the table. Once you decide on how you want to invest, you then need to perform a deal analysis. If you want to invest in rental properties, you need to gauge how much the monthly rent will be, which expenses you will have to pay and what you could resell the property for.

What are all the types of real estate investing?

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