Real Estate Investing
Guide to Real Estate Investing
How do I invest in real estate?
While purchasing a rental or commercial property is a great way to generate income, not many people have the cash available to do so. Real estate investment trusts (REITs) are publicly traded investment vehicles that offer retail investors real estate exposure without having to put forth a down payment or be a landlord. There are also various online real estate crowdfunding investment opportunities, real estate investment groups (REIGs), and avenues to rent properties you already own such as Airbnb.
What is a Real Estate Investment Trust (REIT)?
A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. These companies allow clients to invest in office buildings and rental properties, which are generally not feasible for individual investors to purchase directly. You can invest in REITs—as well as REIT mutual funds and REIT ETFs—by purchasing shares through a broker.
What is real estate wholesaling?
Real estate wholesaling is a business venture in which the wholesaler acts like an intermediary, selling the property on behalf of the property owner and keeping the profit. The wholesaler doesn’t actually purchase the property, instead, they are afforded the right to sell the property on behalf of the owner for an amount of time determined by the contract.
Is flipping houses an easy way to make money?
While flipping houses can in fact be a lucrative endeavor, it requires a lot of research, up-front capital, time, and patience. Flipping houses also requires hard labor skills to improve the home’s value. If you aren’t adept at handiwork, you will need to pay a professional to do the renovations and repairs, further reducing the odds of making a substantial profit on your investment.
The capitalization rate is the expected rate of return an investor can expect to receive from owning and operating a piece of commercial real estate. The capitalized or “cap” rate is calculated by dividing the net operating income by property asset value and is expressed as a percentage.
Triple Net Lease (NNN)
A triple net lease (NNN) is a type of commercial lease in which the tenant promises to pay all the expenses of the property, including real estate taxes, building insurance, and maintenance in addition to the rent and other expenses. Many investors view triple net leases as attractive investment vehicles because they provide low-risk, steady income.
Real Estate Investment Group (REIG)
A real estate investment group (REIG) buys or builds various types of real estate, such as a set of apartment blocks or condos, then allows investors to purchase them through the company, thereby joining the group. REIGs are most attractive to high-net-worth investors seeking to invest directly in real estate but who don’t want to assume full property management responsibilities. Unlike real estate investment trusts (REITs), REIGs are not subject to any specific limitations or disclosures.
Real Estate Investement Trust
A real estate investment trust (REIT) owns, operates, or finances income-generating real estate. Properties in a REIT portfolio may include apartment complexes, data centers, healthcare facilities, hotels, infrastructure, office buildings, retail centers, self-storage, timberland, and warehouses. In general, REITs specialize in a specific real estate sector. The three types of REITs are equity REITs, which own and manage income-producing real estate, mortgage REITs, which lend money to real estate owners and operators either directly through mortgages and loans, and hybrid REITs, which use the investment strategies of equity and mortgage REITs.
Commercial Real Estate Loan
A commercial real estate loan is financing for properties such as retail malls, shopping centers, office buildings, and hotels. Commercial real estate loans are very different from mortgages and carry different tax implications. Commercial real estate loans are almost always given to corporations and businesses rather than individuals.
Investment Real Estate
Investment real estate is a piece of real estate that generates income or is otherwise intended for investment purposes that is not used as a primary residence. Investment property can be commercial or residential and holds different tax implications than residential real estate.