Real estate investment has changed dramatically over the last two decades giving individual investors access to many different real estate related investments. New platforms have also come out to help you make smart investments. Here are three tips for investing in real estate today:
REITS
Real estate investment trusts (REITs) are gaining popularity as an option for real estate investing. You can purchase shares in a public REIT just as you would stocks. The business model of a REIT is owning and or developing income-producing assets in a particular segment of the real estate market. You can invest in a REIT with a focus on commercial real estate (offices or malls) or a focus on residential (apartments or condos).
Many experts advise using REITs in your portfolio to balance your stock and bond funds and mitigate portfolio risk since this asset class often does well when other investments are not.
Before you invest, make sure you understand how the trust is designed and how value is derived from its holdings. The performance of a REIT is based on cash flow and profits from selling properties so it won’t be impacted as much by factors that typically determine stock and bond funds. Additionally, experts advise that REITs should make up no more than 10-20 percent of your portfolio.
Real Estate Investment Partnerships
Another way to invest in real estate is through investment partnerships. There are a few ways to structure this including tenant in common projects, general partnerships, limited liability partnership or limited liability corporations. Each has advantages and disadvantages so make sure you do your due diligence on your partners and potential liabilities.
Take a look at how decisions will be made and how managing partner/partners will be selected. Always insist on written agreement, which should be reviewed by a real estate attorney. Limited liability partnerships are frequently established having an experienced property manager or developer as the general partner. Investors are used for financing projects and they are usually brought on as limited partners.
Peer-Based Real Estate Platforms
You can also invest through peer to peer lending platforms. Fundrise was one of the first firms to offer residential real estate loan products. SoFi has also begun mortgage underwriting. Experts argue that the real estate investment sector has matured to the point that it should become a new asset class along with stocks, bonds, and cash.
Or go with the simplest way of investing in real estate - search the latest listings for sale.