When investing in real estate, there’s the question of which investment path to take for optimal returns and success. While every real estate investment opportunity offers unique benefits and potentials, it’s always crucial to know which path to take that aligns with your financial goals.
Like any other investment, the first step in real estate investment is often the most difficult for many, as they don’t know much about real estate investing yet. As your first step into real estate investing, we’ll guide you below on which real estate investment opportunities to consider for a successful venture.
Rental Properties
Whether you’re going for a build to rent property or are buying an existing apartment, investing in rental properties is amongst the surest paths to success in the real estate industry. You can either pay cash or finance your property, depending on your financial preparedness and investment goals.
However, in either case, you’ll need substantial cash on hand to fund upfront maintenance, which will cover the period when your property is empty or tenants haven’t paid their rent. The main benefit of a rental property is its ability to raise a constant source of income, enough to acquire more property when leveraged. Once you’ve entered the market successfully with a single property, you can scale your way up into a real estate guru with income streams from multiple properties.
Real Estate Investment Trusts (REITs)
A REIT is a great investment opportunity for first-time investors who don’t wish to buy or manage a property actively. It offers the chance of portfolio exposure to real estate without engaging in traditional real estate transactions. As an investor in a REIT, your money and other investors’ money is used by an investment corporation or trust to buy and operate income properties.
Every investor or unit holder is then paid a dividend income, a portion of the REIT earnings, and capital appreciation when the property value increases. As a first-time investor, investing in REITs can allow you to learn and compare the different real estate market opportunities, such as residential and commercial. You can then open your own investment corporation or trust for a more solid investment path.
Real Estate Investment Groups (REIGs)
If you’re looking to invest in real estate but don’t want to engage in hands-on management, a REIG can be an ideal path. REIGs pool together several investors’ money and invest it in rental properties, whose rental proceeds are channelled to the investors as income and appreciation. The managing company buys and builds a set of condos and rental apartment blocks, which are distributed among investors based on their percentage contribution.
An investor could own multiple or a single unit, but the managing company operates and manages all the units collectively. They interview tenants, collect the rent, handle maintenance, and publish advertisements on behalf of the owners. In return, the company deducts a percentage of the monthly rent before sending the balance to the owners.
Understanding the different types of real estate investment opportunities is crucial for choosing the right path for a first-time investor. Knowing what can work for you best can help you maximize your investment potential and improve your chances for success. Whether you want to go for rental properties or REIGs, understanding how each option works before choosing can put you in an advantageous position.
