Types of real estate investment
There are four main categories of real estate investments:
- Housing (the buildings in which people live)
- Commercial (commercial buildings)
- Unused land (undeveloped real estate)
- Third parties (investments in crowdfunding agreements, investment funds, etc.)
While some types of investments fall into more than one category, here we can focus on residential real estate investments.
1. Peer-to-peer lending
If you want to start investing in real estate but have little money, know that you can invest $5000 or less.
Mutual loans can be an exciting option, especially if you are interested in helping others. This style of investing involves giving money to people or projects you really believe in, such as helping someone buy a home or making major repairs to real estate.
The three main participants in mutual mortgage lending are:
- Peer Street is a crowdfunding platform for home buyers who usually pay for themselves in less than two years. You must be an approved investor, but you can start investing as soon as you pay $1000.
- A lending club that offers more investment opportunities than just real estate and only needs $1,000 to get started.
- Prosper is another personal credit platform that allows you to start small investments for just $25.
It is worth remembering that even with generous returns, an investment of a few thousand dollars is unlikely to raise a large fortune. However, mutual loans can be a great way to get your foot in the water by investing in real estate with minimal risk.
2. Crowdfunding
Much like peer-to-peer lending, crowdfunding involves many people involved in a single issue and can be an attractive method for novice real estate investors.
While platforms like GoFundMe and Kickstarter are commonly used to help individuals, small groups with personal goals, or startups, real estate crowdfunding allows you and other investors to pool their resources to fund real estate developers.
Usually developers buy rental properties from pooled funds, and investors earn a small portion of their normal rental income.
3. Real Estate Investment Trusts (REITs)
You can look at REIT as a way to invest in real estate. The trust operates as a business that focuses on various types of income-producing real estate, such as hotels, apartment buildings, seniors’ residences, etc.
As with most investments, the more money you can make, the more profit you will have in the future, but a REIT can be achieved by investing in real estate for the everyday buyer.
4. Fix-and-flip homes
If you’re vaguely interested in real estate and have a TV, you’ve almost certainly seen one or two shows that flip through the house.
The premise is simple enough: find a house that needs renovation, buy it at a low price, arrange it and look good, and sell the property profitably. Wash and repeat as desired.
“Flipping is a great way to make a lot of money,” says Terrell. Depending on your investment goals — as well as whether you’re now looking to make money, and take a longer-term approach — a house flip can mean you turn a profit in a few weeks or months rather than a year.
5. Short term rent
Platforms like Airbnb and Booking.com offer several alternatives to traditional hotel accommodation, so getting another (or third) property, such as a short-term vacation rental, can be a profitable investment.
However, this option is far from practical. Once you have completed the process of purchasing, decorating and installing the gate, you should also be aware of the work that needs to be done to transform your home into a new guest every few days or weeks.
Tasks such as deep cleaning, freshening the air and replacing worn out items involve time and money, which could eat up your earnings if your rental isn’t booked regularly – this can happen in the event of an unexpected global pandemic.
6. Long-term rent
Long-term lease is an asset for which tenants sign extended leases, which means you avoid the constant flow of vacation rentals.
Becoming a home owner is one of the most popular forms of real estate investing, which is why Terrell highly recommends using it as a long-term asset creation strategy.
“By flipping, you basically improve your property, you take money and you give 30 percent to the government, and you let someone else activate it, and they’re going to make a fortune out of it,” Terrell says, noting that here, he is. It is important that you understand your investment objectives.
7. Rent-to-own lease options
While a rental property (RTO) may not always be the best buying strategy, if you are the one who has to sell the house, a well-structured lease that your tenant can purchase can serve as a template. Real estate investment.
Buyers often use RTOs who need extra time to make a down payment or get a mortgage permit, but unless the home needs repairs the homeowner can’t afford, sellers aren’t interested in completing them. I accept the purchase. Unless the deal is considered an investment opportunity.
8. Find a partner
Pooling resources with a friend, family member, or colleague who is also interested in investing in real estate gives everyone the opportunity to build a broader network of potential investment properties. Higher purchasing power can help you:
- Buildings in different units
- Mixed real estate with residential and commercial buildings
- Real estate outside the country
- Financing the purchase of others with private loans
- For long-term rental housing
One caveat: Resist the temptation to let the confidentiality of your investment partner(s) take precedence over due diligence requirements. Before you raise money, make sure you have a legal framework in place to protect everyone.
9. Take an apartment building
When you think of “apartment buildings,” apartment complexes, or spacious apartment buildings, think again. A modest two-story home is considered an apartment building, and any property with four units or less is given a great deal of flexibility and is managed by an independent real estate investor.
You have several options when investing in apartment buildings. You can live in an apartment and rent it to others (which is why you get certain tax and insurance deductions); You can designate some units to be used as long-term rentals and others to provide short-term stays; Or you can simply rent a per-unit rental strategy.
10. Wholesale
Wholesaling real estate can be a lucrative way to raise capital, but this type of investment comes late on our list because it requires experience to succeed.
In short, wholesaling When you find a great real estate offer, set the price, then turn around and sell (before actual closing) to an investor, developer, or anyone else who wants a slightly higher price.
“If I could get real estate under contract for $200,000, I might be able to sell it to an investor for $210,000,” Terrell explains. “Actually, I never close any property, I just sign a contract and sell it, and I get $10,000 in wholesale.
11. Buying and dividing land
Buying land is an exciting opportunity if you are going to build a custom home, but it can also be a profitable investment strategy – if you know what you’re doing.
Dividing the state requires a high level of expertise, and large areas of undeveloped land are purchased and then divided into separate sale plots. These lands can be used for residential or commercial purposes, but there are many legal provisions regarding zoning and details of how the land is to be divided.
Rules vary by state and province, so do your homework before investing in real estate.
Real estate is an investment of money and time
Whether your goals are short-term, long-term, or a combination of these, there are several ways to invest in real estate. Before you start saving, do a thorough research, talk to the experts, and work with an experienced real estate agent who will go a long way to making sure you choose your lifestyle.
