Investing in Real Estate

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The investment industry has several different types of real estate. Commercial real estate consists of office buildings, industrial property, and working farms. Residential real estate includes single-family residences, condos, townhouses, duplexes, vacation homes, and more. Industrial property includes industrial buildings, office properties, and warehouses. Lastly, land represents undeveloped and working farms. Listed below are some of the main types of real estate investments.

Investments in real estate

When choosing investments in real estate, there are many factors to consider, including the level of risk, the amount of effort involved, and the type of return you expect. In general, you should aim to match risk and return with your investment goals. If you plan on investing in residential or commercial properties, you may consider investing in mortgage-backed securities (MBS) or equity real estate investment trusts (REITs).

While most people invest in real estate when they purchase a home, more adventurous investors may consider private real estate offerings, similar to PE and VC funds, and invest in complex projects and talented management teams. Using alternative investment strategies may improve portfolio yields and open up unique opportunities in less efficient markets. Here are some of the most popular real estate funds:

Investing in commercial real estate via REITs

There are many reasons to invest in commercial real estate via REITs. While there are a few risks associated with investing in these funds, they often offer attractive yields and potential for capital appreciation. Inflation is one major reason REITs may do better than other types of investments during this time, as real estate values rise with the overall economy. Another advantage of investing in REITs is that the dividends that investors receive are fully taxdeductible, unlike capital gains from equities that are held for at least a year.

REITs are a great option for first-time investors who want to get into real estate without incurring a large capital investment. Directly owning a commercial property requires considerable expertise, financial acumen, and ongoing management. In addition, direct ownership often requires a large initial capital investment. By contrast, REITs are much easier to purchase, and allow a relatively inexperienced investor to enter the market.

Investing in industrial real estate via MBS

There are two types of commercial mortgage backed securities: agency and private. Agency MBS are issued by government-sponsored entities like the federal home loan mortgage corporation and the federal national mortgage association. These securities are considered safe investments because they are backed by mortgages and have AA or A ratings. Private investment options are also available to accredited investors and tax-exempt accounts. The best way to invest in commercial mortgage backed securities is to find a broker that is willing to work with you and offer a negotiated investment plan.