90% of the world’s millionaires have some amount of real estate exposure. Real estate investing is a good way to develop net worth and also new forms of income. In the past, real estate investing was for investors who qualified for loans. This meant higher tax bracket people. But in today’s time, technology has made it quite easier to make small investments.
What is Real Estate?
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Real estate is a real property that consists of land which includes buildings, roads, structures, and improvements. Property rights give you ownership to the land. Real estate is a popular business.
Types of real estate
Residential real estate
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It is any property that is used for residential purposes. For example, single-family homes, multi-family homes, or duplexes. These can also include cooperatives and townhouses.
Commercial real estate
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Any property used for business purposes. These include apartment complexes, gas stations, and hospitals. These also include hotels, offices, restaurants, shops, and theaters.
Industrial real estate
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Any property used for manufacturing and production. It is also used for distribution and storage. It is also used for research and development.
Land and special purpose
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This includes undeveloped property and vacant land. This includes agricultural lands such as farms and timberland. This also includes orchards and ranches.
So, here are some ways to invest in real estate:
Commercial real estate
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Commercial real estate means buying properties for office, or retail. It can also mean buying properties for medical or other commercial uses. Traditionally, you rent these spaces to businesses rather than individuals. For example, a doctor may want to consider buying a building for his practice.
Industrial real estate
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It is similar to commercial real estate investing. Here, you buy real estate and rent it out to other businesses. In most cases, what happens is that industrial real estate buildings accommodate manufacture, printing, or other large equipment. Your tenants may have specialized needs like coolers, ACs, racks, or loading docks.
Land development
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Land development means buying raw land and building commercial or residential buildings on it. Land developers need to work closely with city planners, or engineers to get better results. It can be a mixed-land use business or retail or building residential area. But there should be approved before building it.
Land for resource extraction
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Investing in land for resource extraction is a different form of investment. The resource of value is done through drilling rights. It is not direct land ownership. This is done in resource-rich areas.
Hard money lending
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Hard money loans are those loans that are short-term and with a lien against a property. Home flippers and other developers can need these loans because they want to secure longer-term financing for their projects. There are many online hard money lending platforms. But you would feel more comfortable networking with your local community with this risky type of loan.
Real estate investment trusts (REITs)
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REITs are a platform of real estate investments held to generate cash flow. Publicly traded REITs invest in commercial real estate. These include storage and office buildings across a geographically diverse region. Public REITs are bought and sold through your brokerage. Private REITs are less liquid and these are required to be held for years. Private REITs may emphasize land development. They put more emphasis on large rental properties or other investment types.
Real estate syndications
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Real estate syndications mean that a group of people co-invest in a large real estate deal. Many online companies have come up and made investing in real estate easier. With some of these companies, you can invest with just a few dollars.
With a real estate syndication, you become a limited partner in an LLC that owns a property. The person running the syndication manages the property and is the general partner.
Farmland investing
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Farmland investors buy and rent out to farmers. Farmers provide the equipment, seed, and other inputs. You may not be an expert in finding farmland. But there are many companies that can help in marketing your farmland.
House flipping
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It is a glamorous business. It is easy to make money in it. You need to buy a house at a low price. Then, fixing it up. And selling it at a nice price. The best tip worth giving here is that one should talk with local house flippers before getting into the business.
Long-term single-family homes
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Buying a single-family home and then renting it out for a year or more is the trick here. It can give you a stable cash flow. If you currently own any house and are looking to move, checking the rental prices in the area is a good step.
Be sure to consider maintenance and vacancy costs when you are considering whether to keep or buy a single-family home.
Small multi-family
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Duplexes, triplexes, and quadplexes allow you to buy a property with a traditional mortgage and you can turn each unit into an income unit. In many markets, small multi-family homes give the best chance for real estate investors to earn profits.
These homes come at a slower rate than single-family homes, so you would need to buy with keeping a bird’s eye view towards cash flow rather than appreciation.
Vacation rentals
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You can rent a property a week at a time and can attract much higher payments. This is higher than long-term leases. Higher payments may mean higher expenses too. You would have to pay someone to clean the house. The income tends to be seasonal- this is one factor. You may find that you are losing money, especially in the first few months.
Conclusion
There are many benefits of real estate. The assets should be well-chosen. Investors can enjoy cash flow. There are excellent returns also. There are tax advantages. Cash flow is the net income from a real estate investment after mortgage payments have been made. This is also that payment that comes after operating expenses have ben made.
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