So you think that as long as you have a piece of property and that somebody is paying rent monthly, you are good to go? Yes, that is one facet when investing in real estate but investing in real estate is much more than that. It would help if you could dig deeper and learn more before you go into Real Estate investment.
Where will you put your money? Do you want to invest in a residential property or would you rather go for commercial real estate? If you have an even bigger budget, you might want to consider going into an industrial real estate or retail real estate. There are other types of real estate investment such as mortgage lending, leaseback or sale transactions or REITs and mixed-use real estate as well.
Knowing the characteristics and limitations of each type will help you decide which is best suited for your need. Here’s an explanation of some of the types of real estate investment that you can plunk your money into.
Commercial real estate are pieces of property that are used for offices, stores and any type of business entities. The good news about this kind of real estate is that you have a long term agreement with your renter- meaning you have steady cash flow for a long time. The downside of this kind of agreement is that if the rental prices in the area shoot up because of an economic boom, you can’t raise your rates as you have to honor what has been agreed upon when you signed the long term lease.
Mixed-use real estate are properties that are more flexible in nature. In one building, you can host offices, retail shops, and everything in between. Combination real estate like this is like putting your eggs in different baskets. This way, if one office does not do well, then you can still earn from the other tenants of your building.
REITs or Real Estate Investment Trusts is another avenue for you to have a diverse real estate portfolio. Being a landowner can be a source of great money but an even greater headache. So if you don’t’ want to deal with the day to day operations of being a landowner, then investing through a REIT is a good option for you. Investing in REIT is like buying stocks, or shares, from a reputable company – you become part owner of the properties that these companies own and you just wait for the dividends to come.
As always, know the pros and the cons of the kind of real estate that you want to invest in. Check how deep your pockets are because some properties take longer to put money back in. So learn as much as you can so that you will know what is best for you.