Real estate can be a prudent investment for a diverse portfolio. However, owning property outright is not necessarily for everyone. Luckily, there are many options available for investors who want to put their money in real estate without becoming a landlord.
“Some people may buy their homes as a real estate investment, but this path may not be for everyone,” explains Richard Cayne of Meyer International and Asia Wealth Group. “But there are other alternatives that allow you to profit from real estate as well.”
Types of real estate investments
Each of these types deserve their own articles, but here we will just summarize to give you an idea of what is available.
What most individual investors may think of when considering real estate is residential property. This is, forgive the pun, closest to home. You can buy property for you and your family to live in and still reap benefits from the investment. Or you can rent it out for added income.
Commercial real estate is basically that which is not residential. Think of hotels, shops, warehouses, and the like. Even if you are interested in investing in this type of real estate for a reselling opportunity, it can be riskier than residential property. Factors that determine this include size, current tenants, future leases, property insurance risks.
It could be potential farmland or may be an excellent site for a residential or commercial development. There are many benefits to buying undeveloped land. However, it may take longer to see any benefits, and you may need to do more legwork depending on whether you want to develop the land yourself or to sell it on.
Real estate investment trusts (REITs) are probably among the most passive ways to invest in property. Financial institutions or real estate companies or developers form trusts through which they raise money to buy, manage, or sell properties. You still need to do your due diligence to determine if the REIT in question satisfies your needs. Another similar option to REITs would be real estate mutual funds. You could consider these as one step removed as they typically not only invest in REITs, but they may also invest in real estate operations and related firms.
Real estate investment clubs (REICs) or real estate investment groups (REIGs) are basically informal REITs. Investors get together to form partnerships, pools money together, and then invest their pooled funds in real estate. The strength and success of either depends on the individual members and how well they work together. They do offer benefits, including less regulatory restrictions, but they can also require more attention than some of the other options.
Want to learn more about investing in real estate?
Unsure which type of real estate investment is right for you? Do you want to diversify your portfolio enough to hedge against inflation? Then perhaps a REIT or real estate mutual fund would work for you. Interested in leveraging your investment to raise capital for other purchases? You may want to look at commercial or residential property. Purchasing property can be one of the biggest investments you make, so you should make sure to consult with a trusted financial advisor such as Richard Cayne, who has extensive experience with the full range of real estate investment options.