Investing in real estate should be considered carefully especially if you are new to investments. There are financial planners and experienced fund managers that will be able to minimize the risk to your portfolio and make sure that you can achieve your financial goals. There are many ways of investing in real estate that we will explain in the article below.
A property fund is a method of investing in property without putting in a lot of capital. There are fund managers that will take the responsibility of managing the property related assets and increasing the value of the property to ensure that the investment performs well. You can make lump sum investments along with others to pool together resources and purchase a wide variety of assets to be managed by a fund manager with expertise in the industry.
The properties the fund will buy can be factories, offices, warehouses, apartments etc. When you invest in such a fund, the income generated will be distributed at regular intervals when the value of the assets that you have invested in increases after the sale. There is a certain risk and reward that you have to consider when it comes to such funds.
There are real estate investment trusts where you can invest a small amount of money. There are public companies that sell stocks and issues bonds in order to raise capital to purchase and rent out real estate assets. The after tax profits of these trusts are then paid to the investors as dividends. There is low risk when it comes to REITs and they are professionally managed so you don’t need to worry about the rental logistics. They are a liquid real estate investment as you can buy and sell shares of REIT stock in the market. This is great for new investors to get into the game.
Crowd funding has also become quite popular because investors get more of a hands-on approach when it comes to this platform. You will be able to invest in specific development projects pertaining to real estate with crowdfunding platforms. The money is pooled from different investors and they will need to commit for more than 5 years when it comes to the investment. So you may not be able to access the money before then depending on the rules of the platform. If you want to withdraw before this, there may be certain penalties charged.
If you are serious about investing in real estate, you can purchase rental properties. There is a guaranteed steady cash flow that you can receive from these properties. And property values generally increase over time. But there is a lot of work you have to put in when it comes to this type of investment. Many investors hire a property manager to take care of the daily requirements of the properties as this can free them up to concentrate on investments only.
You can also invest in your own home by taking out a mortgage and making payments to secure ownership of your home. You need to track how the local market performs and this will allow you to pick the right time to sell your home and cash in on the equity. However, this option will have lower annual returns.
