Real Estate Investment describes things bought by a person basically for income or appreciation, not to stay in. Most investors own multiple properties – some of the properties may be used by the owner, while others are purely investment oriented, providing rental income and property value appreciation. Income taxation for primarily residence is quite different from that of investment properties.
Investment in real estates help in building wealth, producing a cash flow and allow one to diversify an investment portfolio. Residential investment properties have houses, townhouses and condominiums and on the other hand, the investments in commercial real estate have owned by retail stores, office buildings storage, and warehouses. An investor can typically receive capital appreciation as the property value increases. An investor can avail him or herself of rental income.
WAYS TO INVEST IN REAL ESTATE
1. Purchase and Rent
The simplest form of investing in real estate is purchasing or leasing a property over a long period and letting it out to either residential or commercial tenants. This will require high upfront investment and maintenance expenses. The property should be cleared of any legal problems or dues. The property can be acquired through an outright purchase, loan, or lease. Commercial properties have to be registered at the sub-registrar’s office with two witnesses, following due procedures. Once registered, it is possible to attract tenants by advertising the age-old method. The lease agreement, once accepted and signed, guarantees monthly rental income. Overlapping lease periods may guarantee the continuous flow of them so no periods go dry and maintenance is done on time. However, there is a property management firm that can be hired to carry on these processes, but their commission should be calculated with.
2. Sublet a Portion of Your Existing Real Estate
Renting out a portion of one’s existing property is another option for those who do not wish to make a large upfront investment. The choice can range from offering an unused floor of a house, a room, and so on. A possible disadvantage to this method is the disruptive nature of the extra traffic this might generate and potential challenge in good compatibility with business operations. Such issues are usually managed with a good lease agreement that specifies the conditions clearly. This method is becoming popular among those who have some experience in basic contracting skills.
3. Fix and Flip
Most investors have the capital to purchase a property that is in need of a repair to fix and then sell it at an up ticked price. This form of an investment requires the strategy to be short-term, for which information about the market and the cost of renovation is essential. This type of investment has lesser hassle for long-term maintenance and registration issues compared to holding a property perpetually. The chancing of investing with an experienced partner will be more helpful.
4. Through ETFs, Mutual Funds, and REITs
Other forms of real estate investing include investing in real estate through an ETF, a mutual fund, and investing in REITs. ETFs and mutual funds are highly liquid investment options at low cost, although investing in these forms of real estate may not offer monthly dividends as these just invest in real estate stocks or developers. Returns are generally realized by selling the shares when their value has appreciated. REITs can be fully backed by real estate holdings or mortgages, where investors pool monies and get returns in the form of dividends according to shareholding percentages. Though the amount required to invest in REITs is smaller than that for equity products, yields are not as high in the case of REITs. An investor has almost no say in the asset allocation for a particular REIT.
TYPES OF REAL ESTATE INVESTMENTS
There are many real estate investment types, all differing in their nature.
