Investing in real estate can be a great way to build passive income and wealth. There are a lot of options for building wealth, from stocks and bonds to crypto or even investing in an SPDR ETF, but real estate investing is one of the more fun options.
However, with so many different types of investments available, it can be difficult to know which type of real estate investing is best for you and your goals. In this blog post, we’ll explore the different types of real estate investments, so you can decide which one is right for you.
1. Residential Real Estate Investing
First, we’ll discuss residential real estate investing. This type of investment involves purchasing single-family homes, condos, or multi-unit buildings that are used as rental properties. Residential real estate investors usually earn income by collecting rent payments from tenants and increasing their home’s value by making improvements.
2. Commercial Real Estate Investing
Next is commercial real estate investing. Here, you purchase office buildings, retail spaces, warehouses, or other commercial properties that generate revenue through tenants’ rent payments or other sources such as vending machines, laundry services, etc. Commercial real estate investments tend to have lower vacancy rates than residential properties, so you’ll likely fill up the spaces immediately. And they’re generally more profitable in the long run.
3. Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are another option for those interested in real estate investing. REITs are publicly traded stocks that own and manage a portfolio of income-producing properties such as office buildings, shopping centers, apartment complexes, etc. They give investors access to large portfolios without purchasing each property individually. However, so that you know, dividend payouts from REITs may be higher but also come with greater volatility compared to direct ownership investments in individual property assets.
4. Crowdfunded Real Estate Investing
And last on our list is crowdfunding. This type of investment has become an increasingly popular way for people to invest in real estate with smaller amounts of capital. It also allows multiple individuals to pool their money together to buy a piece of an investment property like an apartment building or warehouse where these investors then receive returns based on the performance of the rental income generated by the property they own a piece of. Then again, due to regulations surrounding crowdfunded investments such as the Securities Exchange Commission (SEC) rules and restrictions set by crowdfunding platforms themselves, typically only accredited investors or those who have a higher net worth can take part in these investment type.
Now that you’re familiar with the common types of real estate investing strategies available today, it’s time for you to consider which one is the best fit for your personal financial goals and current financial situation. Pro Tip: do considerable research online or speak with an experienced professional regarding any questions you have before deciding which kind of investment is right for you!