Diving into the world of real estate can seem daunting and costly. There are a lot of risks involved in real estate, as the market can be finicky and hard to navigate for beginners. It can also be hard to navigate the world of real estate investing. Many people only think of investing as buying a home or renting a property out to tenants. If you aren’t looking to be a landlord or own properties, but you still want to invest in real estate, there are other, less-traditional options for investing.
Real Estate Equity
Real estate investment trusts (REITs) and private equity firms own or fund properties that generate income. Companies that offer these kinds of investments can be found in almost every sector of real estate, such as health care facilities, commercial, and industrial properties. REITs are required by law to pay 90% of the income produced by properties in dividends, meaning investors in the trust can receive hefty returns. However, a majority of REITs will charge a commission when purchased or sold, which can decrease the value of the investment. If you are looking to make regular investments, REITs may not be for you since the commissions can add up quickly. In that case, look to private equity firms.
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Real Estate Companies
Investing in real estate companies is much like investing in REITs, since they also own or manage properties. Unlike REITs, though, these companies may not pay as high of a dividend because they are not governed by the same set of regulations. Buying stock in real estate companies, if properly researched, can be incredibly lucrative. Commercial real estate developers, resorts, and hotels can be great pathways for this type of investment.
Online Real Estate
Technology’s slow bleed into real estate is giving investors more options to get involved. New, tech-based companies understand the need for investment opportunities that lie outside the traditional realm of property buying. Websites such as Fundrise and Realty Mogul allow investors to buy into real estate, commercial or residential, and then receive cash flow distributions.
Many real estate experts believe that construction is the new frontier when it comes to investing. As older developments need revamping and new developments need to be created, construction companies offer a unique means of investing. There are large, national homebuilders to invest in, such as LGI Homes and Pulte Homes, as well as a multitude of other companies. Just be sure to do your research to see who is getting the best contracts and whose records indicate the best returns.
Any of these options can generate amazing returns on investments. They are also great opportunities to dip your toes into real estate and begin learning the ins and outs of the market. Starting small and working your way up to owning properties allows you to see how real estate functions and what is and isn’t profitable. As always in real estate, research is key, so make sure you’re researching the best companies and opportunities for you.