Three Convenient Forms of Real Estate Investments Explained

The real estate market is lucrative and offers many potentially rewarding investment opportunities. However, many interested investors stay away because of the perceived financial barriers. This is because many people are only familiar with the traditional real estate investment forms, such as buying property, flipping deteriorated houses, and buying raw land to build new property from scratch. Understandably, such investments are expensive and may involve complicated logistics.

However, there are other easier and less expensive ways to invest in real estate and still reap the lucrative rewards. Here is an overview of three convenient types of real estate investments.

Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust (REIT) is a company or trust that specializes in real estate investments. REITs are categorized into two types based on their investments:

• Equity REITs – REITs that invest in physical real estate properties. They make money by selling or renting out real estate properties, which they can develop from scratch or buy.
• Mortgage REITs – REITs that specialize in real estate financing solutions, including providing mortgages and buying mortgage-backed securities.

REITs are publicly traded companies with shares traded on major stock exchange platforms. To this end, you can invest in the trust’s real estate portfolio by buying its stocks, entitling you to a share of its profits.

REITs offer several benefits over traditional real estate investments. Notably, they are legally required to pay out at least 90% of their profits to their investors. To this end, investing in one would earn you good rewards, considering the huge returns in real estate. Moreover, you can easily and quickly liquidate your investment by selling your shares.

Investing in real estate via a REIT is also convenient in two ways. First, it is affordable because the individual shares are much cheaper than developing or buying real estate property. Second, it is easy because you only need to buy shares to partake in the profits – the REIT oversees all logistics involved in traditional real estate investments, such as property acquisition, development, and management.

Real Estate Investment Groups (REIGs)

A Real Estate Investment Group (REIG) is a company that allows individuals to invest in their real estate property. The company builds or buys real estate property, such as condos and apartments. It then allows investors to buy one or multiple units of the property.

The real estate property you buy from a REIG is in your name. However, the REIG manages the properties on behalf of its investors for a fee. Most notably, it collects the rent and distributes the profits among the investors after deducting property management fees.

The main benefit of investing in a REIG is that it is rewarding. Notably, the REIG pools all of the rent money to protect against vacancies and distributes it equitably among the investors. As such, you can still make money even when your units are vacant. Additionally, investing in a REIG offers the convenience of professional property management services.

However, one of the important things to note about investing in a REIG is that it can be expensive, as it involves buying one or more whole units of real estate property. Additionally, liquidating your investment can take some time, depending on the available buyers.

Real Estate Crowdfunding

Real estate crowdfunding involves pooling money from many individuals and using it to invest in real estate. These platforms usually operate by providing financial backing for large real estate properties using their investors’ money. Moreover, some crowdfunding platforms can also directly develop and manage real estate property.

Investing in a real estate crowdfunding platform is much cheaper than developing or buying property. It is also convenient because someone else manages the property and handles all of the logistics. Most notably, it is profitable and can generate quick returns when investing in existing property or ongoing real estate projects. However, it is worth noting that liquidating your real estate investment can take some time.

Wrapping Up

Overall, these three forms of real estate investments are convenient, affordable, and rewarding. They are easy and convenient because professionals handle all of the logistics, such as property development, marketing, and maintenance, on your behalf. Additionally, REITs and crowdfunding platforms are more affordable than developing or buying property. Most importantly, they are profitable and can generate a sizeable passive income over time.