As you uncover and learn more about different types of real estate investments, it’s not unusual to find about someone who built fortune by learning to specialize in a particular niche. So without further ado, let’s dive into the basic types of property investments and find one that suits you the most!
Publicly traded REITs are firms holding commercial real estate ( hotels, offices and malls). By investing in REITs, you invest in the properties owned by such businesses, without too many uncertainties explicitly associated with buying real estate.
REITs must return at least 90% of their taxable profits to shareholders annually. In addition to diversifying their portfolios of real estate, investors may earn lucrative dividends. Also, REITs offer more liquidity than other real-estate investments: if you suddenly need some cash, you can sell your shares on the stock exchange.
- Crowdfunding Platforms
Real estate crowdfunding platforms give investors access to property assets that can produce large returns but also bear considerable risk. Many crowdfunding sites are available only to qualified donors, yet some are open to non-accredited investors.
These investments also come in the form of nontraded REITs, or REITs not listed on stock exchange. Since they are not traded publicly, nontraded REITs can be highly illiquid, meaning your funds will be invested for at least several years, and you may not be able to pull your money from the investment if you need it.
- Residential Real Estate
Residential property is virtually anywhere people live or stay, such as single-family homes, condos and holiday homes. Residential real estate owners make money by receiving rent from tenants.
Investing in residential real estate can take many forms. It can be as simple as renting a spare room or as complicated as flipping a house for profit.
- Commercial Real Estate
Commercial real estate is a business-rented or leased property. A single-business office block, a gas station and a shopping mall are all examples of commercial properties.
Industrial and retail properties can come under the commercial umbrella. Industrial property generally refers to properties where products are produced or housed rather than sold, like warehouses and factories. Retail space is where a buyer can purchase a product or service. Commercial buildings have longer leases and can demand more maintenance than residential properties, which may mean more long-term profits for a property owner. They also need higher down and property maintenance expenses.
- Raw Land
Investors buy land for commercial or residential development.
Buying land to develop involves a fair amount of market research, especially if you’re planning to develop yourself. This style of investment is ideally suited to those with a significant amount of money to spend and a deep knowledge of all real estate aspects — building codes, zoning laws, flood plains — as well as knowing both residential and commercial rental markets.
So there you have it – you have conventional real estate (residential or commercial property) for which you should know the local market. If you’d prefer a more hands-off approach, REITs and crowdfunding platforms are the way to add real estate to your portfolio without owning physical property.