What are the four types of real estate investments?

Investing in traditional physical real estate can offer high returns, but it also requires more money upfront and can have high ongoing costs. REITs and crowdfunding platforms have a lower financial barrier to entry, meaning you can invest in multiple types of real estate for much less than it would cost to invest in even a single traditional property.

What are the four types of real estate investments?

Investing in traditional physical real estate can offer high returns, but it also requires more money upfront and can have high ongoing costs. REITs and crowdfunding platforms have a lower financial barrier to entry, meaning you can invest in multiple types of real estate for much less than it would cost to invest in even a single traditional property. These alternative real estate investments also offer the distinct advantage of not having to leave your home or put on your trousers to start investing. Publicly traded REITs, or real estate investment trusts, are companies that own commercial real estate (think hotels, offices and shopping centres).

You can invest in shares of these companies on a stock exchange. By investing in REITs, you are investing in the real estate owned by these companies, without the risks associated with direct ownership of the real estate. But others, such as Fundrise and RealtyMogul, offer investors who do not meet these minimums, known as non-accredited investors, access to investments in which they would not otherwise be able to invest. These investments often take the form of unlisted REITs, or unlisted REITs.

Because they are unlisted, unlisted REITs can be highly illiquid, meaning that your funds will be invested for at least several years, and you may not have the ability to withdraw your money from the investment if you need to. Keep in mind that many crowdfunding platforms have a short track record and have not yet weathered an economic downturn. Residential real estate is virtually any place where people live or stay, such as single-family homes, condominiums and holiday homes. Residential real estate investors make money by collecting rent (or regular short-term rental payments) from the tenants of the property, through the appreciation value their property accumulates between the time they buy it and the time they sell it, or both.

Residential property investment can take many forms. It can be as simple as renting out a spare room or as complicated as buying and flipping a house for a profit. Commercial real estate is space rented or leased by a company. An office building leased by a single company, a gas station, a shopping mall with several unique businesses, and leased restaurants are all examples of commercial real estate.

Unless the company owns the property, each business will pay rent to the landlord. If you prefer to stay hands-off with your investments, REITs and crowdfunding platforms are easier ways to add real estate to your portfolio without owning physical property. Some brokerages offer publicly traded REITs and REIT investment funds. The commercial real estate (CRE) market is best known for prime shopping centres in California, trophy office properties in Manhattan and large-scale investor personalities.

Due to the specialised nature of commercial real estate and the financial volume of transactions, commercial real estate for sale is often not publicly traded. Instead, large CRE firms such as Cushman and Wakefield, CBRE, Avison Young and Marcus & Millichap work directly with buyers, sellers, institutional investors and lenders. Vacant or raw land is purchased for future development and to obtain natural resource rights, such as mineral, water or air rights in urban areas. Investing in land is a popular long-term strategy because taxes and maintenance costs are often very minimal compared to developed properties with buildings and tenants.

This is an important reason why many people start investing in residential real estate. The market is twice as large as commercial real estate, financing for residential real estate is easy, and homes are a property type that investors and tenants know and understand. Jeff has over 25 years of experience in all segments of the real estate industry, including investment, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

Passive investments are ways of investing in real estate that often do not require you to personally own or manage a property. Investing in real estate investment trusts (REITs), real estate funds and crowdfunding activities are considered passive. These methods allow you to invest in real estate without having to commit a lot of money up front or manage any property. Residential real estate is probably the most well-known and understood real estate investment.

That said, there are many different types of residential real estate investments that you may or may not be aware of, from micro-flipping to accessory dwelling units (ADUs). Residential real estate investments are typically active, meaning that they will likely require significant monetary and labour contributions on your part, but have the potential to generate substantial returns and ongoing cash flow. Since residential real estate investments can be many different things, let's explore some of your options. Commercial real estate refers to real estate investments that are typically non-residential.

Hotels, warehouses, offices and retail shops are examples of commercial real estate investments. These types of investments are also typically considered active and involve the investor owning space and leasing it to a company that will use it. As with residential real estate, additional cash flow can be obtained by collecting rent or selling the property as its value appreciates. Undeveloped land refers to a property that has absolutely nothing on it: buildings, roads, crops or other.

Investment in undeveloped land is usually cheaper than developed land and, like other examples of real estate, its value also appreciates over time. You can also use a loan to buy raw land, especially if you plan to develop it. Many raw land investors lease their properties to farmers for agricultural purposes or seek properties with future development potential to sell at an appreciated value at a later date. Real estate investment trusts, or REITs, are companies that operate as trusts and oversee a range of real estate investments.

Unlike many of the above options, REITs are considered passive investments. Instead of owning property yourself, you can invest in a REIT and generate income from the properties managed by the company. Some REITs are listed on the New York Stock Exchange (NYSE) and are publicly traded. These companies often specialise in commercial properties, such as shopping centres, offices and hospitals, so if you are interested in commercial real estate but lack the capital to invest in a property yourself, a REIT may be a great option.

Real estate crowdfunding is a new method in which investors pool together, typically online, to pool their funds and invest in opportunities they would not be able to finance on their own. This method of investing, like REITs, involves much less money upfront and is also considered passive. Some online real estate crowdfunding platforms are open to investors in general, but there are many that require users to demonstrate a certain level of income before investing. Rocket Mortgage, 1050 Woodward Ave.

If you invest in rental properties, you become a landlord, so you should consider whether you'll be comfortable in that role. As a landlord, you will be responsible for things like paying the mortgage, property taxes and insurance, maintaining the property, finding tenants and resolving any problems. A real estate investment trust (REIT) is created when a corporation (or trust) is formed to use investors' money to buy, operate and sell income-producing properties. REITs are bought and sold on major stock exchanges, just like stocks and exchange-traded funds (ETFs).

To be a REIT, the entity must pay 90 per cent of its taxable profits in the form of dividends to shareholders. In this way, REITs avoid paying corporate income tax, whereas a normal company would have to pay tax on its profits, which would reduce the profits it could distribute to its shareholders. Like dividend-paying shares, REITs are suitable for investors who want regular income, but also offer the opportunity for appreciation. REITs invest in a wide variety of properties, such as shopping centres (about a quarter of all REITs specialise in them), healthcare facilities, mortgages and office buildings.

Compared to other types of real estate investments, REITs have the advantage of being very liquid. Real estate investment groups (REIGs) are a kind of small investment funds for rental properties. If you want to own rental property but don't want the hassles of being a landlord, a real estate investment trust may be the solution for you. Real estate investment trusts invest primarily in REITs and real estate operating companies.

They offer the possibility to gain diversified exposure to the real estate sector with a relatively small amount of capital. Depending on their strategy and diversification objectives, they provide investors with a much broader choice of assets than can be achieved by buying individual REITs. Like REITs, these funds are fairly liquid. Another significant advantage for retail investors is the research and analytical information provided by the fund.

This may include details on the assets purchased and management's perspective on the viability and performance of specific real estate investments and as an asset class. More speculative investors may invest in a family of real estate investment funds, tactically overweighting particular property types or regions to maximise returns. Because it is backed by bricks and mortar, direct real estate investment also involves less principal-agent conflict, i.e. the extent to which the investor's interest depends on the integrity and competence of managers and borrowers.

Even the more indirect forms of investment carry some protection. REITs, for example, require a minimum percentage of profits (90%) to be paid out in the form of dividends. Unlike a stock or bond transaction, which can be completed in seconds, a real estate transaction can take months to close. Even with the help of a broker, simply finding the right counterparty can take several weeks of work.

Of course, REITs and real estate investment trusts offer greater liquidity and market pricing. But they come at the price of higher volatility and lower diversification benefits, as they have a much higher correlation to the general stock market than direct real estate investments. First, landowners do not have to worry about the same legal requirements and regulatory headaches as homeowners. There is no rent control, no lengthy eviction proceedings lasting months, no right of first refusal.

Many buy and manage large apartment buildings, commercial premises, office buildings or other types of commercial property. Some also invest in real estate-backed debt, to add more income potential for shareholders. But none are very liquid: it is not quick or easy to sell the shares, and some hold investors for periods of five years or more. Private REITs offer an excellent way for individual investors to spread their money across many real estate projects.

You can diversify beyond residential property to include commercial real estate. Just don't expect to sell shares at any given time. You can invest in real estate syndicates, for example. These are usually large commercial real estate projects, in which you invest money to become a fractional owner.

The syndicator (the lead investor) oversees the purchase and management of the property, and you earn money passively as a fractional owner of the property. There are different types of real estate: land, buildings, overhead rights above ground and underground rights below ground. The term real estate means real or physical property. Real comes from the Latin root res, or things.

Others say it comes from the Latin word rex, meaning "royal", as kings used to own all the land in their kingdoms. Initially, the Constitution restricted the right to vote only to owners of real estate. Real estate agents are often knowledgeable about FSBO properties in a given area and may be willing to pass this information on to their investment partners. Many invest in real estate in one form or another, and most specifically target accredited investors.

The least involved and possibly lowest risk type of investment is the real estate investment trust (REIT). Real estate can improve the risk and return profile of an investor's portfolio, offering competitive risk-adjusted returns. Through your regular brokerage account or even your tax-sheltered retirement accounts, you can buy shares of public real estate investment trusts (REITs). Publicly traded REITs also offer flexible liquidity in contrast to other types of real estate investments.

Because they are publicly traded, REITs tend to move more in line with stock markets than other types of real estate investments. External investors are then sought to provide financing for the real estate project, in exchange for a share of the property as limited partners. Most new investors in real estate know this, but what they do not know is how many different types of real estate investments there are. Therefore, real estate tends to maintain the purchasing power of capital, avoiding some of the inflationary pressure on tenants and incorporating some of the inflationary pressure, in the form of capital appreciation.

To access the MLS, investors have to be real estate agents themselves or be willing to work with one. When looking at the different options for investing in residential real estate, it is also easy to understand why the value of the U.