Real estate investment is a great way to diversify your portfolio and grow wealth. While real estate may have generated a great deal of wealth over the years, there are still many options for investors. It’s easy to think that you need lots of money to get into real estate, but that’s not always the case. You can make good money if you know how and where to invest. Consider the following real investment options to grow your portfolio:
Table of Contents
1. Rentals
Rental property is among the most financially rewarding investments that work well when you want to earn a passive income. You can either invest in long-term or short-term rentals. The former property is rented for at least one year, while the latter is rented for a few days or weeks. Most investors acquire properties and convert them into rentals due to the quick income they generate. However, it’s crucial to consider the rental location to ensure it suits your intended rental strategy.
While the investment process seems straightforward, it requires significant capital and involves annual maintenance costs. It’s best to do your due diligence and ensure the property doesn’t involve any hidden costs that can affect your profits.
2. Commercial Real Estate Investments
Commercial real estate property offers lucrative opportunities to generate attractive profits. Some of the most appropriate commercial properties you can invest in include offices, industrial buildings, retail property, and multifamily projects. It’s also a great option for entrepreneurs seeking to improve their local community. The high potential for consistent cash flow makes commercial properties a great real estate investment.
Unlike other forms of real estate investment, commercial properties have long leases, higher income potential, and low vacancy rates. Moreover, industrial real estate property includes service revenue streams that help maximize the return on investment. Investing in this niche ensures minimal competition since property acquisition requires more capital than residential property.
Since people always seek retail and office space to operate their businesses, commercial properties remain profitable. However, some locations are more lucrative than others due to the demand and popularity of commercial activities in that area.
3. House Flipping
House flipping involves the acquisition of undervalued properties that you can rehabilitate and sell at a decent profit. While the ROI can be quite lucrative, you might have to wait for some time before the property sells. This option is best suited for investors with adequate real estate experience in valuation, marketing, and rehabilitation.
It also requires sufficient capital and real estate acumen to undertake necessary repairs. Regardless, you can still start your real estate investment journey through various financing options like reverse mortgage Ontario.
Ideally, looking for distressed homes in nice neighborhoods is best because they are more valuable. However, you need to understand the approximate after-repair value of the property. Unlike other real estate investment options, house-flipping can offer quick returns if you can find attractive properties for potential buyers.
4. Real Estate Investment Groups (REIGs)
REIGs are great options when investing in real estate, but you want to avoid handling property maintenance issues. REIGs are similar to mutual funds; the only peculiarity is that they focus on rental property.
Most REIGs acquire rental properties like condos and apartments and invite entrepreneurs to buy them. While individual investors own the properties, the company handles most administrative and management aspects of the assets. In exchange, the investors pay a small percentage of their income.
All property units in a real estate investment group contribute a percentage of their rent to cushion against seasonal vacancy rates. You will still receive an income even when your unit is empty.
5. Real Estate Investment Trusts (REITs)
REITs are investment companies that own a vast portfolio of commercial real estate property, including offices, restaurants, malls, shops, and other commercial properties. Compared to other real estate options, REITs offer you the opportunity to own commercial property like office buildings and malls that may not be feasible for most individual investors due to capital constraints.
In addition, REITs are highly liquid investments because they are traded on the exchange market. You don’t need a real estate agent to cash out on your investment. REITs often pay high dividends since the law requires them to pay at least 90% of their profits to the shareholders.
The type of REITs you buy often determines the risk factor since non-publicly traded REITS can be hard to value and sell. New investors may be more comfortable acquiring publicly traded REITs due to the high liquidity.
Endnote
When you’re new to the real estate industry, it’s easy to overlook the range of investment options. However, the best investments should meet your goals, risk tolerance, and long-term gains. Consider the amount you are willing to invest and the level of responsibility you want to assume before making a decision.
