What is Real Estate Investing?
Real estate investments can be a great strategy to build wealth. Buying and owning property can be lucrative and satisfying. It is not like a bond or stock investment. Prospective owners can purchase the property by first buying off a part of the whole cost. After that, the balance is paid off with some added interest.
In many cases, mortgages require around a certain percentage of down payment, but there are substances where it can be lower than that. Being able to control assets after papers have been signed is a good thing for landlords and flippers. It allows taking second mortgages on homes and properties.
Types of Real Estate Investing
Commercial real estate
Normally, commercial real estate investing involves leasing out a property for purposes of retail and business. Investing in this area involves developing and purchasing properties to then rent out to commercial tenants. Raw land that is purchased for commercial property also falls under this definition.
Types of commercial real estate properties include:
- Retail stores: These are properties that are leased out for purposes of retail business, like grocery stores, pharmacies, boutiques, and so on. Even though more people are shopping online than ever before, having a physical address is still critical for many retail businesses.
- Offices: These are leased out to companies or businesses that need office space to handle their activities. Even with many companies adopting remote work policies, there are still situations and industries requiring workers to be at the office physically, making office space a good investment.
- Hotels: As places that host visitors, hotels play an important role in society and are always in demand, which makes investing in these kinds of commercial real estate a good idea.
- Warehouses: As e-commerce continues to grow in popularity, warehouse properties that provide more storage space are increasingly in demand, making them a good real estate investment.
- Industrial properties: This is another investment opportunity where you can build industrial properties to lease out to other investors.
Residential real estate
Types of residential real estate investment properties include:
- Apartments: This is a great way to invest because you get tenants to pay rent. It is a long-term investment with great returns even though the initial capital can be high. Multifamily properties are in high demand, and apartments are popular today, especially with the attainable prices and low interest rates. Investing in larger units is a good idea, especially with many people opting to work from home. Upgraded units are also lucrative because people are trying to improve living standards.
- Houses: Whether you’re interested in rehabbing an old home or building a new one, houses can provide a great return on your investment. In addition to selling a home for a profit, you could also elect to rent the home out to generate monthly rental income. In addition, you could consider a strategy sometimes referred to as “house hacking,” in which you live in your investment property while renting out the other rooms or units in the building.
- Land: Investing in land is another good real estate investment option. Since land is scarce, it is a valuable commodity and can bring a great return on your investment.
Buying raw land can be risky if you don’t have a plan as to how you will develop it. If you are looking to generate income from your plot of land apart from simply waiting for its value to appreciate, you should consider developing commercial or residential properties on it. You could set up your land for recreational activities, or you could take advantage of the location for mineral production, crop production such as orchards or vineyards, or raising livestock.
For individuals who have ample disposable income, buying land can be a great investment opportunity; however, many retail investors do not fall into this category. It’s important to have a good handle on your personal financial situation before choosing to invest in land.
Investing in Real Estate For Beginners
Real estate has typically been a venture that requires you to have ample financing if you are to get the most out of it. This is why many real estate investing opportunities are only available to accredited investors, or investors who have earned income of more than $200,000 in each of the past two years, or who have a net worth of $1 million or more. This presents a problem for retail investors who want to get involved in real estate but do not meet the requirements to be considered accredited.
Luckily, investing in real estate for beginners is a possibility, and involves understanding, recognizing, and putting money to good use. Regardless of what you intend to do, you will still require a little money. Some investment platforms allow you to get started with just a few hundred dollars. Groundfloor's real estate investment platform offers the lowest investment minimum and makes it easy for beginner investors with no money to get started with its investment size of just $10.
Remember, real estate is an asset form and its liquidity can be limited compared to other investments. All types of investments need capital, and using other people’s money can work to your advantage.
You can achieve this kind of investing by:
- Purchasing a money mortgage or seller financing
- Lease options where the buyer is charged a termly premium
- Hard money lenders: usually from private individuals and groups
- Micro-loans
- Forming partnerships with likeminded individuals
- Relying on home equity loans
- Trade houses
- Government schemes
- SBA loans
- Owning shares in real estate investment trusts (REITs)
Real Estate Apps for Easy Investing
With current technological advances, making a real estate investment has become easy and convenient. Real estate investing apps have been created to help investors and borrowers along the way. Groundfloor’s unique platform is one of the best choices.
Groundfloor helps by offering short-term, high-yield real estate debt investment opportunities to the general public. It gives everyone the chance to invest in real estate on their terms and benefit from its reliable returns and low volatility. With Groundfloor’s platform, you can start investing in real estate projects happening around the country with as little as $10 per project, making it a great option for beginners. And, since Groundfloor operates as a hard money lender to finance the projects that are on the platform, it can also help prospective real estate investors interested in fixing and flipping properties themselves.
Conclusion
When you understand how real estate works, it is possible to invest and start earning a profit. Investing in real estate is one of the best investment strategies you should try today, and platforms like Groundfloor make it easy to get started.