21/09/2023
In this article we'll be expounding on the several types of real estate investments and highlighting there pros and cons. These real estate investment include: Physical real estate investments, REITs and crowdfunding platforms.
Physical real estate investments
Physical real estate is also known as traditional real estate. Sub categories of physical real estate investments includes land, residential, industrial and commercial properties.
Land
This investment suite individuals with large amount of capital to invest and are well informed of all things real estate such as building codes, zoning regulations, flood plains and also an understanding of the local residential and commercial rental markets.
Residential properties
Investing in residential real estate can take many forms. It can be as simple as renting out a vacant room or buying and renovating a house or apartment for a relatively high profit.
Commercial properties
Commercial real estate refers to a space that is rented or leased by a business. examples include an office building rented by a single business, a gas station, a strip mall with several unique businesses and leased restaurants.
Industrial properties
Similarity between commercial and industrial property is that both are used for business purpose but unlike commercial properties, industrial properties varies from power plants to food processing centers, warehouses and factories.
Pros and Cons
An advantage of investing in physical real estate is that it offers a high return, but it also also has its disadvantage which is, it requires a large amount of capital to invest and it can also have high operational costs in the long run.
REITs and crowdfunding platforms
REITs
Real estate investment trusts are companies that own commercial real estate such as offices, hotels and malls. Individuals can invest in shares of these companies on a stock exchange. Investing in REITs is equivalent to investing in the real estate these companies own, with minimal risks associated compared to directly owning real estate. Return on REITs are at least 90% of their taxable income to shareholders each year.
Pros of REITs include; Investors can receive high dividends, investors diversify their portfolios with real estate and also REITs traded publicly, relatively offer more liquidity than other real estate investments.
Crowdfunding platforms
This category offer investors access to real estate investments that attract high returns with a significant amount of risk. Some crowdfunding platforms are only open to accredited investors.
Other pros of REITs and crowdfunding platforms include, lower financial barrier to entry: Individuals can invest in multiple types of real estate for much less it would cost to invest in physical real estate property.
