Categories of Real Estate Investment

Investing in real estate is comparatively easier than investing in bonds or stocks. New investors are more comfortable with real estate investing because it has a potential to bring more money. However, it will take time to get the desirable return from real estate investment and an investor will have to face challenges and competition. It is not important whether or not you have any experience in stock or bond investment because there is a fair chance that you get real estate investment.

There are no complex rules in a real estate investment and you would naturally consider investing in a real estate market as it offers a lot of opportunities than just purchasing a property, refurnishing the cabinets and doors, or finding a trustworthy tenant. However, you should not invest in a real estate market in your own name because if the other party file a suit against you for damages, you may find it hard to survive financially and there are chances that you have to go beyond the insurance settlement. Therefore, to avoid the risk of getting into huge financial trouble, experienced investors always use a special legal structure called Limited Liability Company (LLC) or Limited Partnership (LP).

The filing and paperwork requirements are not so extensive and so, you can use a separate LLC for every real estate investment you made. It is called Asset Separation because if one of your real estate investments goes bankrupt, you can save other investments from trouble. Professional on-line filing companies like SunDoc Filings can assist you with the necessary paperwork.

There are different types of real estate investment available in the market but before you decide which type of investment you should invest in, you should consult Your Personal Financial Mentor because he will help you make a better decision keeping in mind the legal requirements and your financial goals. Following are the types of real estate investments that are available for investors:

Residential Real Estate Investment

This is the simplest type of real estate investment where you invest in a residential property, such as houses, vacation houses, town houses and apartment buildings and a person or family pays a rent to live in that property. The duration of their stay is decided in a rental agreement with the party.

Industrial Real Estate Investment

This investment consists of a car wash, storage units and other special purpose properties that generate income from those who temporarily use these facilities. For example, these investments generate cash from fee and service income streams, such as placing coin-operated vacuum cleaners at a car wash garage to increase the return on real estate investments.

Commercial Real Estate Investment

As the name suggests, this investment consists of office buildings. You can use your savings to construct a building with individual offices and earn a rent by leasing them out to small business owners and companies.

Retail Real Estate Investment

It involves investing in strip malls, shopping complex, and other retail outlets where you earn by receiving rent from tenants of the store. In some cases, you can also choose to receive a percentage of sales made by the tenant in addition to the base rent so that a property can be kept in a good condition.

Mixed-use Real Estate Investment

It combines any of the above mentioned investments into a single project and offers diversification which can reduce the risk of loss to a minimum. These real estate investments are suitable for those investors who have significant assets as they have a built-in diversification prospect.

Real Estate Investment Trusts (REITS)

It is a trust, corporation or association that acts as an agent in a real estate investment or real estate mortgages. They trade like bonds and stock in the market and have a well diversified portfolio of underlying real estate mortgages and real estate property investments.

Categories: Real Estate

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August 26, 2013 Categories of Real Estate Investment