Real estate investments are very appealing. Who doesn’t want to earn extra money, right? Whether you’re looking to be a landlord or invest in a REIT or real estate investment trust, you can learn about real estate investments below.
By having some knowledge on investing in real estate, you’ll be better equipped when you talk to a professional about options available to you.
The Classic Way to Invest in Real Estate
The old school or traditional way to invest is to purchase an investment property. For example, you can dabble in real estate investing here in Fort Collins, and look for tenants and then manage the property yourself or resell the property and make a profit off of it.
You could do this just once or multiple times, provided that you have the money. You could even rent out holiday homes or become a serial house flipper. You just have to remember to take into account the maintenance expenses, property taxes and potential vacancies when you’re trying to decide what you can afford, money-wise and time-wise.
REITs or Real Estate Investment Trusts
If you’re not looking to be a landlord, you can consider investing in real estate through a REIT or real estate investment trust. When you purchase shares in a REIT, you earn money from payouts through real estate companies.
You could either purchase a REIT mutual fund or REIT shares that could be passively managed index funds or actively managed mutual funds. They can likewise be international or domestic REITs. Furthermore, there are hybrid REITs, mortgage REITs, and equity REITs.
Most people actually think of equity REITs when they hear the word REIT. Basically, with an equity rate, you can manage residential or commercial income-generating properties. This is possible because the REIT would have equity in various properties and could afford to give out some of its income to investors.
On the other hand, mortgage REITs don’t come with the same type of equity. They work by lending real estate companies money either through purchasing mortgage-guaranteed securities or direct loans. Rather than obtaining profit from rent, a mortgage REIT acquires profits mainly from interest on home loans.
Real Estate Crowdfunding
Crowdfunding has recently made its way into the world of real estate investing. Some real estate companies allow individual investors to buy into real estate investments and obtain income proportionate to their investments.
Essentially, this method of investing offers more control over real estate investments in a REIT setup. You’ll be able to evaluate potential investments one by one and then select which property you want to invest in.
You just have to ensure that the company you’re investing with is reputable and that you file your income taxes properly.
If you have already diversified your investments across bonds and stocks, are meeting your financial goals for retirement, and have a substantial emergency fund, branching out through real estate investing is probably the next step for you.
Just make sure to think things through, weigh all the pros and cons, and work with a real estate company that has your best interests in mind.