Real Estate Investing
Real estate investing is a popular investment choice for many people. But it is a very broad investment category. Real estate investing refers to making money from real property or some type of cash flow that is based on real property. In this article, we will go over several different types of real estate investing to help you find options that will best fit into your portfolio.
Most Common Real Estate Investments
There are four types of real estate investments that are most commonly used. These include:
- Rental Income: By far, the most popular reason to invest in real estate is for rental income. This involves purchasing a property and renting it to tenants for cash flow. This can be done with houses, apartment buildings, office buildings, retail spaces, or industrial buildings.
- Appreciation: The second most popular way to make funds off of real estate investments through value appreciation. This happens when you purchase a property and sell it for a higher price. This increase in price can come from upgrades you made to the property or increased demand in the area. Flipping homes would fall under this category of real estate investing.
- Real Estate Related Income: Real estate related income is not necessarily a real estate investment category. But is related to real estate investing. It is income earned by brokers or
Other Types of Real Estate Investments
There are also other types of real estate investing that take a more third-party approach. The first way is investing in real estate lending. For most investors, this would mean purchasing stock in a company that underwrites mortgages. For others, it could mean granting private mortgages and making income off of a high-interest rate.
There are also Real Estate Investment Trusts or REITs. You can purchase a share in a REIT through a brokerage account, Roth IRS, or other types of custodial accounts.
Real Estate vs. Traditional Investing
Many who are looking into real estate investing want to know it if is a better choice than traditional investing. Every type of investment carries some form of risk. So before making any type of investment decision, it is important to weigh the positives against the potential negatives. Make sure your choices fall within your personal risk levels. If you are not sure what level of risk you can take, meet with a qualified financial planner who can help you determine what types of investments best suit you. Additionally, it is important to note, a well-balanced portfolio will have investments in multiple different financial sectors. So, you should consider making room in your portfolio for both traditional and real estate investing.
Is Real Estate Investing for You?
Now that you have a better understanding of many of the types of real estate investing available, you have to determine if it is right for you. Every investor has unique needs so you will have to analyze what your needs are. However, it is important to seek proper advice before making any large financial decisions.
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