Real estate investing, for most of us, is uncharted territory. Unlike stocks and bonds, real estate is considered an “alternative asset.” Previously known as difficult to afford and achieve, until recently. Just because investing in real estate may be unfamiliar to you, doesn’t mean you shouldn’t try it. When done right, real estate can be an easy and reliable way to make a lot of return. Investing in real estate can create a consistent stream of extra income. Although, real estate can seem intimidating, “where do you start?” That doesn’t have to be the case. I’m here to give you all the information and help you need.
So let's start by asking, “what is real estate investing?” Investing is defined by “expend money with the expectation of achieving a profit or material result. Real estate on the other hand, generally breaks down into three categories: residential, commercial, and industrial. Residential real estate consists of single-family homes, multi-family homes, townhouses, condominiums, and multi-family homes that people use as a living space and not a working space. Commercial real estate is a property that is used for the purpose of business. And lastly, Industrial real estate, as the name suggests these properties serve an industrial business purpose.
In addition to property types, there are three main ways to make money from real estate investments: interest from loans, appreciation, and rent. A real estate loan is an arrangement where investors lend money to a real estate developer and earn money from interest payments. The appreciation, or increase in the value of a property over time, represents the potential profit available to an investor when that property is sold. An investor who holds equity ownership of a property can earn income by leasing that property. As with the income generated from a debt investment, rental income can provide a regular income stream.
Each category of real estate and type of investment carries its own set of risks and rewards. Regardless of the type of real estate that you invest in, it is important to choose investments wisely. Many investors like to use the projected rate of return as a key metric when analyzing real estate. However, more seasoned real estate investors will often turn to capitalization rate, or “cap rate,” as a preferred way to assess an opportunity.
There is a multitude of ways to invest in real estate with any amount of money, time commitment, and investment horizon. Real estate investment options break down into two major categories: active and passive investments. Here are some fundamental ways to invest in real estate with options ranging from intense, high-effort to hands-off low-effort: Active Real Estate Investing (doing it yourself), house-flipping, rental properties, Airbnb, Passive Real Estate Investing (the hands-off way), Private Equity Fund, Opportunity Funds, etc.
As with any investment, real estate investments require you to understand and weigh the risks and potential rewards before beginning. Depending on which way you choose to invest in real estate, you’ll need varying amounts of time, beginning capital, knowledge, and patience. If it fits with your goals, available resources, and personality, fast-paced, high-risk house flipping ventures may be what makes the most sense with you. If you don’t have extensive knowledge and experience to venture into house-flipping, or if you don’t have a strong desire to become a landlord, you can still access the diversification benefits and earning potential of real estate. There are passive investment options, such as Fundrise, that can help you unlock real estate without the ongoing obligations that fall on the shoulder of active investors.
So let's start by asking, “what is real estate investing?” Investing is defined by “expend money with the expectation of achieving a profit or material result. Real estate on the other hand, generally breaks down into three categories: residential, commercial, and industrial. Residential real estate consists of single-family homes, multi-family homes, townhouses, condominiums, and multi-family homes that people use as a living space and not a working space. Commercial real estate is a property that is used for the purpose of business. And lastly, Industrial real estate, as the name suggests these properties serve an industrial business purpose.
In addition to property types, there are three main ways to make money from real estate investments: interest from loans, appreciation, and rent. A real estate loan is an arrangement where investors lend money to a real estate developer and earn money from interest payments. The appreciation, or increase in the value of a property over time, represents the potential profit available to an investor when that property is sold. An investor who holds equity ownership of a property can earn income by leasing that property. As with the income generated from a debt investment, rental income can provide a regular income stream.
Each category of real estate and type of investment carries its own set of risks and rewards. Regardless of the type of real estate that you invest in, it is important to choose investments wisely. Many investors like to use the projected rate of return as a key metric when analyzing real estate. However, more seasoned real estate investors will often turn to capitalization rate, or “cap rate,” as a preferred way to assess an opportunity.
There is a multitude of ways to invest in real estate with any amount of money, time commitment, and investment horizon. Real estate investment options break down into two major categories: active and passive investments. Here are some fundamental ways to invest in real estate with options ranging from intense, high-effort to hands-off low-effort: Active Real Estate Investing (doing it yourself), house-flipping, rental properties, Airbnb, Passive Real Estate Investing (the hands-off way), Private Equity Fund, Opportunity Funds, etc.
As with any investment, real estate investments require you to understand and weigh the risks and potential rewards before beginning. Depending on which way you choose to invest in real estate, you’ll need varying amounts of time, beginning capital, knowledge, and patience. If it fits with your goals, available resources, and personality, fast-paced, high-risk house flipping ventures may be what makes the most sense with you. If you don’t have extensive knowledge and experience to venture into house-flipping, or if you don’t have a strong desire to become a landlord, you can still access the diversification benefits and earning potential of real estate. There are passive investment options, such as Fundrise, that can help you unlock real estate without the ongoing obligations that fall on the shoulder of active investors.
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