Property ownership is not always required for real estate investments. There are numerous other opportunities for investors to reap the benefits of real estate appreciation without having to shoulder the ongoing responsibilities of building maintenance. Investors who want to go beyond the traditional sense of investing can do so across multiple locations, property sizes, and real estate classes. While these may serve as stepping stones to future property ownership, the returns from these investments may be compelling enough to deter you from purchasing a home altogether.
Real estate investing is lucrative and it doesn’t require a significant amount of capital. While it is common to believe that the only way to invest in real estate is through direct property ownership, the truth is that numerous other options provide lucrative and consistent cash flow without the need to purchase a property and with less hassle.
But why do real estate investing?
More wealth has been created by the real estate industry than by any other industry. However, people are still hesitant to join the fray. Most people believe that they must start with some capital, but this is not always the case.
Real estate investing can be a great way to diversify a portfolio while also providing a hedge against market volatility. Because real estate is not directly correlated with the market, it can provide stability in a portfolio when stocks rise and fall. Many investment options like commercial real estate do not correlate with the financial markets, Thus, it safeguards your investment portfolio from economic fluctuations. CRE is a stable and physical asset, as opposed to other volatile investment products.
There are several advantages to real estate investing. It generates steady income flow, appreciates at pace with inflation, gives high return due to favorable leverage, and allows for equity development by reducing debt.
Investors have chosen real estate as a haven for their spare cash to achieve consistent returns that at the very least outperform inflation. Many people, however, are unsure how much money to invest and what options are available within their financial constraints.
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So, what are the real estate investing methods for you in 2022?
- REITs: REITs enable you to invest in real estate without owning and managing the actual property. They are also an excellent way to gain exposure to the real estate market without investing large sums of money, especially at today’s high prices. These entities, which invest in and own real estate and real estate-related securities through a tax-advantaged structure, can be a great way for new investors to get started. REITs are a good choice for stock market investors looking for consistent income. They provide investors with access to nonresidential ventures such as malls and office complexes that are otherwise inaccessible to ordinary investors. REITs, like stocks, can be purchased through a brokerage account and provide investors with access to high-quality real estate portfolios managed by experienced and highly qualified fund managers. REITs, in the end, give investors access to expensive real estate without having to pay the premium to buy it directly. REITs are known to provide a minimum annual return of 7-8 percent to small and middle-level investors.
- Fractional Ownership: Have you ever dreamed of investing in that glitzy office building beside your apartment but cannot because you do not have deep pockets? Well, not anymore. You can now invest in a commercial real estate property valued at Rs. 30 crores with a minimum of Rs. 10 lacs through fractional ownership investment in office real estate. Several investors pool their resources to buy a premium office building. The expenses and profits associated with the property are also shared by the investors or co-owners. Rental income gets distributed to investors in proportion to their property investment. The capital gain realized at the sale is also divided proportionally among the investors. The property’s co-owners also earn rental returns ranging from 6% to 10% per year.
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- Real Estate Crowdfunding: Crowdfunding, as defined by the foundational book “The Crowdfunding Bible,” is the practice of requesting the general public to donate money or starting capital to help support new companies. Concepts may be marketed directly to regular Internet users via this type of online fundraising, in which open calls to possible investors are put on websites alongside prospective investment possibilities. These individuals, who contribute to a pool of funds derived from others with similar interests, might give financial support for existing or potential real estate ventures. Such opportunities can take the shape of residential or commercial holdings and can entail either the creation of new housing, retail, or office space or a stake in an existing holding. In essence, real estate crowdfunding allows you to increase or expand your wealth while also starting in the world of property ownership and rental with a little initial investment.
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- House Flipping: Property flipping is a Western notion in which an investor purchases an item – often real estate – and immediately sells it for a profit. The concept is well-known in Western nations, but it is still gaining traction in the Indian market. It is simple to flip properties. You either buy a home with the expectation of a speedy increase in the value of the property and sell it as soon as you earn your projected profit, or you buy a home and remodel it to improve the value of the house and then sell it for a profit. As a real estate flipper, you want to earn money. Property flippers frequently seek to sell discounted houses purchased in less than six months and reap profits. House flippers frequently do not invest in properties that are already in good condition. As a result, the property should possess the inherent worth required to earn extra returns with no changes, or they will remove the property from the competition. Another type of flipper earns money by purchasing low-cost houses and increasing value by remodeling them. It allows investors to afford more than one property.
- Real estate investment groups (REIGs): REIGs are similar to tiny mutual funds that invest in residential units. If you wish to possess or own a residential unit but don’t want the headache of every homeowner, then a REIG may be the answer for you. A REIG company acquires or constructs apartment buildings. Also, they permit investors to buy these properties. At the same time, these investors also join the group. An investor has access to purchase one or more self-contained housing units. But, the REIG maintains all the apartments collectively through maintenance, advertisement of vacancies, and selection of tenants. The firm gets the rental income every month in return for doing these management services.
The Difference Between Direct Vs Indirect Real Estate Investing?
Direct real estate investments entail the ownership and management of properties by a landlord. Residential property is an excellent example of direct real estate investment. However, indirect real estate investments include investing in a trust or a company that holds and manages properties. REITs, commercial real estate fractional ownership, and real estate crowdfunding are some famous examples of indirect real estate investing.
Do you want to invest in fractional ownership of commercial real estate and real estate crowdfunding? Assetmonk is an investing platform based in Hyderabad that specializes in high-end real estate crowdfunding and fractional ownership opportunities in Hyderabad, Bangalore, and Chennai.
