Seven Ways to Invest in Real Estate

Farhana Shereen F

Introduction

Real estate investment is the safest investment one can do because the worth of properties rarely goes down. And even when it goes down, it’s only for a short period. 

Investing in real estate is the most reliable and most secured option. Regardless of what happens, property prices will rise anyway and you can still make a profit. Isn’t that helping people talk about real estate?

What is Real Estate Investment?

A real estate investor is a person who invests in real estate properties. Investors generally make way more money than any other person in the same field due to lack of sufficient industry knowledge and understanding of the market trends. But with adequate information and right guidance, anybody can bag significant profit from their investment. 

So, here is a blog for you to build a basic understanding of how this investment market works. Whether you are an investor or a layman planning to invest in real estate, this blog is something that will definitely help you out in developing a better understanding about how all this works. This blog is going to give you an overview of various aspects of investing in real estate. Let’s now begin with the major types of real estate investments:

Major Types of Real Estate Investment

Before investing, you have to get a clear idea of the different types of real estate. According to the type of property and financial instruments used, real estate is classified into following five categories:

  • Residential – Every human on this planet needs a house to live in. The home-hunt never really comes to an end in anyone’s life. Those who live in rented spaces look to buy their own homes. Those who have their own home look for bigger homes. Those who have bigger homes look for a second home or more luxurious homes. Your home defines the kind of lifestyle you have, and humans have always longed to get a lifestyle which is better than their existing one. That is what makes residential real estate such a sure bet.

Population is another factor that guarantees a rise in the home demand curve. Guess what happens to the population as we move ahead? It grows. As long as the population continues to get bigger, supply and demand will keep shooting up. We’re always going to need more houses than there already is.

  • Commercial Commercial real estate is any kind of real estate that you are doing with some type of business purpose in mind.
  • Industrial – When you go into industrial parks, this is where you get into warehouses and businesses that don’t need that much of a business facade. They often are manufacturing plants, storage spaces, factories and production facilities.

Let us understand this with an example.

One of the primary reasons why McDonald’s make so much profit is because the company owns most of the land and property where its outlets are built. Whoever establish a McDonald’s franchisee pays the estate rent to the company. 

  • Retail Retail is the real estate where you will have businesses that are opening to sell stuff. They are designed for consumers to walk in and people are buying something or they get a chance to experience your service.
  • Mixed Used – Mixed used is when you have special zoning rights on a property to utilise the property for multiple uses. It conveys greater possibility of profit making and widens the scope of how the property can be utilised. 

7 Ways to Invest in Real Estate

The most interesting thing about real estate investment is that there are different strategies out there. If one does not work, there is always another one which would definitely work. We are going to have a look at the most commonly used investing strategies.

  • Invest & Flip It is the most common strategy. This strategy is technically buying a real estate property and selling it out. 

To be able to be successful in investment & flip strategy, you have to be good with marketing and trading your property. Your property should be marketable at the time you want to liquidate it.  

  • Fix & Flip – It is the strategy of buying a real estate property or buying an RFO (ready-for-occupancy) property and fixing it i.e., doing interior designs, repairs, refurbishing it, and selling it at a higher price. The concept of increasing the value based on the condition of the property is Fix & Flip. 

Commonly fix & flip is used when we’re not able to sell the property so it needs to be competitive from the other units. In a general context, you have to get a property in a bad condition in a bargain sale value and then eventually spend time on fixing it and sell it for a profit.  

  • Short-Term Buy & Hold – This strategy is used if the market has not picked up yet. For the short-term buy and hold, it means that you have the property turned over and then wait for one to three years and eventually sell the property.

So, you could think of renting out the property and eventually put it on the market as well. You will be able to get the rental of the property. This is the short-term buy and hold. 

Do this when you cannot sell the property at the moment, probably because there is a lot of inventory, there’s a lot of people selling the property, or there are a lot of people doing the invest and flip technique and there are fewer buyers. So, you will have to wait for the market to pick up to eventually sell the property.  

  • Long-Term Buy & Hold – This strategy is about making money purely from the rental itself. You might want to hold on to the property between 10 – 20 years, it is really accumulating long-term wealth slowly. But eventually, it becomes a passive income. 

For this strategy, there are certain ways to do this as well. It can be self-liquidating the property (you could actually use the payment of your tenant to pay for the amortization).

There are a lot of people who use this strategy. For eg: If you have children, they would need a passive income after college so they don’t have to support their kids anymore. The children could get the money from the rental property. It is a great strategy.  

  • Live-In Flip – When you buy a property and then you will be using it for a while and eventually selling it for some reason. It can be for upgrading or when you don’t need the property anymore. 

This is for those people who do not want to rent at all. For the ones who think renting is really a waste of money. 

So, technically what they do is just buy the property that fits for them at the moment. For eg, a millennial or agency would buy a 22 square meter studio unit property. Eventually, this millennial wants to sell the property to upgrade to a bigger property. 

Live in flip is a very good strategy for you to catch the property prices. If you cannot afford a bigger property now, at least buy a smaller property. You can renovate it and sell it after some time. 

  • Live In Then Rent – This is all about using the property and having it rented out once don’t need it. It is good if you have the liquidity to afford and maintain multiple properties. 

For eg, If you are migrating to somewhere else and you have no use with the property, you can simply rent it out. This is a good strategy to make a rental portfolio.

  • Syndication – Syndication is crowdfunding in real estate. If you cannot afford the property, you could ask some people to own the property and invest with you. There are a lot of people who use this strategy rather than buying an affordable property that doesn’t serve their purpose. 

This strategy can make investing easier and this is commonly used for commercial or retail properties. Syndication does not have to be formal. The important thing in this strategy is trust and partnership. 

Conclusion

There are a lot of clear benefits of investing in real estate. Although it might take long research to be a good investor, this action is not going to make you regret any part of your life. Grab good knowledge on the streams and strategies of real estate investment and also about the best places where you can implement it. 

Thank you for reading this article. Hope you understood – what real estate is, the major types of real estate, and the strategies to invest in real estate.

For more information regarding real estate, subscribe to The Real Talks and be updated on the new trends of the industry. For any queries, you can reach out to info@roodland.com. Your doubts and queries will be cleared as soon as possible.

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