Many people shun real estate because they think that it is too complicated to understand, and thus they miss out on investment opportunities just because they view it as uncharted territory. Here we are going to break it down simply.
What is real estate investing?
Real estate investing generally involves purchasing, owning, renting and selling of land, along with all the structure on it, artificial or natural.
There are three types of real estate one can invest in:
1. Residential: involves residential homes, usually places where people live. They are not used commercially.
2. Commercial: these are properties used for commercial purposes. They include restaurants, schools and large apartments.
3. Industrial: these serve industrial purposes, such as warehouses factories and assembly lines.
Other investment forms include interest from loans, appreciation and rent.
Real estate investing can be classified as active or passive investing.
These require high effort;
1. House Flipping
This basically involves buying a home, renovating it and selling it at a higher price. It is usually short term in nature. One needs to have financial knowledge to complete renovation on time and on a budget. The success of this is entirely dependent on an investor
2. Rental Properties
This involves leasing a property to a person group or business. The property can be residential commercial or industrial. The income is usually monthly and in form of rent. The investor is tasked with finding tenants, providing a sound income agreement. Once this is done, they are responsible for repairs maintenance and improvement of the property. One can chose to leave management of the property to a property management company to relieve some pressure for a fee, but in turn they lose some control and a portion of their income.
Airbnb is a technology that allows a person to lease a part of or their entire home to another person for a short while. It is usually done by people who are going away for some time, like on a vacation. Airbnb facilitates booking of the property and creation of a contract agreement. It is done as long as short term rentals are allowed in that area by homeowners associations.
Passive Real Estate Investing
Investors typically provide capital only, then let professionals handle investments on their behalf.
1. Private Equity Funds
This is a model where investors pool money into a fund to make investments. These equity funds have a manager who manages investments. Investors don’t have to be involved directly but it is good to know the risk and the risks and returns of their investments. They are generally illiquid.
2. Real Estate Investment Trust
REITs generally offer a portfolio of real estate to investors. Investors buy shares and earn from debt and equity investments in form of dividends.
3. Online Real Estate Investment Platforms
They pool investments and invest in difficult to find real estate opportunities, either single or diversified portfolios. Many of the have restriction like high investment minimums
In conclusion, real estate investing can offer great returns, giving one a steady income stream, when well managed. To know more about us visit the website at https://3cre.com.