WHAT IS REAL ESTATE?
Real estate is property that consists of houses and land. It is a form of real property (tangible) that is attached to a piece of land and everything that is found there, be it minerals, or any other natural resources as well as man-made too.
INVESTMENT REAL ESTATE.
This is an estate owned for the purposes of generating income, for instance, owning a residential house and rent it out. Investment real estate can be in the form or residential real estate which includes homes and commercial real estate which includes office buildings and warehouses. Investment real estate helps build wealth and increases income. Investing in commercial real estate is more costly than investing in residential estate.
Prospective real estate owners can use leverage to buy a property by paying a portion of the total cost upfront, then paying off the balance, plus interest, over time which is one of the benefits of investing in real estate. Leverage is, in simple terms, using borrowed money to fund an investment, in this case, buy a property. There are high chances of getting returns on your investment although there are risks of losing too in investment real estate. You get to control the property the moment papers are signed even before you are done with the payments for the asset.
WAYS OF INVESTING IN REAL ESTATE.
Real estate investment groups (REIGs).
These are entities that have two or more partners that are focused on real estate. An example is when Company X builds a set of apartments blocks and sell them to other investors. Company X will still manage all of the apartments, advertisement of vacancies and maintenance in exchange for a percentage of the monthly rent. This means investors are not really actively involved and they still earn passive income.
Real Estate Investment Trusts (REITs)
A REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, like any other stock. They give investors entry into nonresidential investments, such as malls or office buildings, that are generally not feasible for individual investors to purchase directly. REITs are highly liquid because they are exchange-traded trusts. There are two types of REITs; equity REITs that own buildings and mortgage REITs that provide financing for real estate and may also invest in mortgage-backed securities (MBS).
An equity REIT represents ownership in real estate whereas the Mortgage REITs focus on the income from real estate mortgage financing.
Online Real Estate Platforms
These are also known as real estate crowdfunding platforms. They are meant for investors who want to join others investing in a bigger commercial or residential deal. This allows people to invest in single or portfolio projects and offers geographic diversification. Investors should pay management fees. Crowdfunding is the riskiest type of real estate investment.
House Flipping.
This involves buying properties that are undervalued and then resell them on a profitable price within six months sometimes without improving the property. You may need to add value to the property before reselling it by renovation.
Rental Properties.
This requires a lot of capital to cover up maintenance costs and when tenants fail to pay their rents. This type of investment provides regular income and can maximize capital through leverage. However, it can be affected if the property is unoccupied, and costs may arise when tenants cause damage to the property.
Rent to Rent.
Rent to rent is when real estate agents or individuals rent properties for a certain period of time paying an agreed amount to the landlord. They then rent that same property to another person on a higher price than that they are paying to the owner of the property. Income from this property is guaranteed for the landlord.
Rent to Own/Buy
Rent to own or rent to buy is usually a way one can end up owning a property or properties. There has to be a leasing agreement that states out the agreed period of time and additional payments. The renter will have an opportunity to buy the property after the lease period.