Real Estate Investment Strategies That Are Uncommon
Real estate investing has gained much-deserved popularity recently, largely contributed to the rising costs of the housing market in Calgary, Canada. In some areas of the country, housing costs rose over 10% on average in 2017. This statistic, combined with other favorable opportunities for investors, indicate imminent growth of this investing market in the impending years.
Although estate investing is generally comprised of uniform factors and logistics, many individuals often associate estate investing with the traditional approach of becoming a landlord. However, there are many other techniques for investing in real estate. Various investing methods actually don’t require an investor to physically own, touch or see any properties. Below we will analyze the top four best not-so-common ways to invest in this market.
Real Estate Notes
A note is simply an assurance of payment, much like a personal check. During the financing of a home mortgage, the homeowner signs a document known as a promissory note. This document states the term of the loan, loan amount, interest percentage, payment amount, frequency and due dates.
Since the note solely is not secured by collateral during the transaction, it is secured through a security instrument confining the note to the deed as a lien on the property as collateral, ultimately resulting in foreclosure.
When investors invest in estate notes, those individuals purchase the secured debt, ultimately becoming the new lender. This purchase amount is generally significantly less than the remaining principal balance, essentially borrowing smarter and making debt a companion.
Investing in Land
A less common, yet perhaps an extremely beneficial and powerful investing strategy does not necessitate the presence of any buildings or structures. Investing in land is very inexpensive from maintenance, utility charges, and mortgage payments standpoints.
The investor simply needs to know whether the land is suitable for building or not. Furthermore, there are no tenants, thorough inspections or mortgage payments. Experienced investors often don’t need to be present in order to buy a piece of land. With adequate research, the scarcity of available, vacant land makes investing in it a very popular estate investment strategy.
Another investment strategy unrelated to physical properties is online investing. Numerous online investment companies allow investors to subsidize into residential or commercial properties, ultimately receiving a generous cash flow allotment in return.
Customarily, an investor’s capital is grouped with other investors’ cash, which is then used to fund residential property, commercial property, apartment complexes and more. These clever investors can benefit from passive income in the form of dividends, distributions and long-term appreciation of the properties invested in.
Furthermore, this investment strategy is similar to investing in REITs and ETFs. REITs allow investors to invest in properties without actually owning physical property. They typically profit investors high dividends, which is a main contributor to the effectiveness of utilizing this investment strategy for retirement purposes.
Although REITs vary in complexity, many of them trade on an exchange similar to a stock, while others cannot be publicly traded. It is critical to know whether a REIT is publicly traded since non-traded ones typically encounter a tough evaluation period. However, those that are publicly traded can be easily purchased through an online broker.
Purchase Commercial, Non-Residential Property
This investment strategy is generally more rewarding than residential property investing. Commercial properties are office buildings, retail buildings, warehouses, industrial buildings, apartment buildings and more.
The greatest benefit of this investment strategy is the income potential. Varying by area, commercial properties typically contain an annual return on initial investment of 6% to 12%, opposed to the return of 1% to 4% associated with residential properties. Additionally, these property owners generally do not have to pay any expenses on the property.
All property expenses including estate taxes are handled by the lessee. The only expense when investing in commercial property, is the owner’s responsible for is the mortgage. Lastly, unlike a residential property, commercial property owners incur fewer consumer protection laws, such as limited security deposits and termination regulations, which control commercial leases.
Before any investment, investors should diligently perform extensive research, while gaining expert personal recommendations to make sound and beneficial investments. Whether an investor wants to buy a home, or sell a home, they must do so in an effective manner in order to benefit financially from each transaction.
For more information contact a trusted local Realtor to discuss real estate investment strategies near you.