Investing in real estate is a strategy focused on the goal of receiving enough return to cover the risk in buying the property as well as the owning cost and taxes. In short it’s an investment with the idea of putting your money to work today and watching it grown over the years. In that capacity there are many different options of real estate investments to consider before diving in an investing capital. Its important to note that when it comes to investing in real estate its common to seer clear of investing in your own name. Most real estate investments are done through Limited Liability Companies as well as Limited Partnerships to protect the investor from the investment.
A typical rental agreement that is made between an owner and a tenant where the tenant pays rent and in exchange the owner maintains the property. As an owner in a rental agreement the investor is responsible for paying the mortgage, taxes as well as the costs of maintaining the building. The downside to this form of real estate investment is it requires more hands on work then most, and diligence surrounding the care of the property. The investor also assumes the risk that there can be damages to the building, bad tenants or no tenants at all.
Real Estate Investment Groups
This particular form of investment is very similar to smaller mutual funds. It is better for those investors who are not as interested in as much hands on work with their properties. They are run when a company buys or builds a property where then investors can come in and invest in that particular property through the company. The management and upkeep of the building is run and handled by the company for a percentage of the revenue from rent.
Real Estate Trading
This is a type if real estate investing that is often called “flipping”. These investments are risky and intended to be short term. The investor intends to purchase a property with the intent to turn around and sell it for a profit. There are two different kinds of “flippers” there is pure flippers who resell the house having made no improvements and then the upgraded flippers who better their property before placing it back on the market. This type of real estate investment holds more risk in that that generally investors don’t hold enough capital to pay the mortgage. This can become a devastating problem if the property doesn’t sell.
For the more market driven investors REIT’s can be a very enticing way to break into the real estate market. In simple terms a REIT is was a corporation or trust uses investors money to purchase and operate income properties. These investments are bought and sold on the major exchanges. For an investment to qualify as a REIT they must pay out 90% of the taxable profits in the form of dividends to their investors and they avoid corporate income taxes. It’s a good investment for stock market investors who are interested in receiving regular income.
Major Types of Real Estate:
Commercial Real Estate
Commercial real estate investments revolve around properties such as office and retail buildings. Its common that commercially owned properties are leased to small businesses or companies with the intention of collecting rents as a form of revenue. In retail real estate such as shopping malls, strip malls and retail store fronts property owners often also receive a percentage of the profits on top of the rent as an incentive to keep the building as up to date and nice as possible.
Industrial Real Estate
Industrial real estate lends itself towards properties such as storage units, car washes and other special purpose facilities. This particular form of real estate investments can be enticing to investors due to its ability to generate great revenues not only from rent but from its ability to impose significant fees as well.
Residential Real Estate
Owning houses, apartments buildings, townhouses and vacation homes all fall under the category of residential real estate. They are rent driven investments where more often then not individuals or families lease or rent for a negotiated length of stay.