Do you plan to invest in Real Estate? You cannot just impulsively invest all of your money without carefully studying its industry. You have to search for the right investment options that you may do that will give you higher returns. But be aware that each type of real estate investing techniques have pros and cons so you must be fully educated. In order to give you an accurate and concise example, you may refer to the following real estate investing tactics below together with its benefits and risks.
Trading in REITs or Real Estate Investment Trusts
You may trade REITs through the help of reputable and huge real estate companies that practice buying and owning multiple types of properties. Its management must be capable of carrying out business decisions in an efficient and lucrative manner so that it can gain the trust of a REIT buyer. You have to make sure that your chosen company is accredited and prestigious with a great background for a long-term period of time so that you will be able to receive higher returns. However, you must be aware of its pros and cons.
Pros:
You can invest passively or without getting involved in its daily operations and you have no huge liability. Professionals would be the one who will help you double your investment and the shares are convenient to sell due to its liquidity.
Cons:
There is a tendency to lose all of the funds you have invested. Regardless of whether the firm is performing well and thriving, all shares are being affected by stock market risks in both regional and national areas that could lessen its actual value overtime.
Direct or Individual Ownership
This tactic includes buying and owning your own assets or properties and personally managing its business systems that encompasses buying distressed homes, flipping or fixing it up through minor renovation, maintaining and leasing it to tenants at reasonable prices. This will give consistent cash flows as you will be dealing with property management.
You have the choice to hire your own employee to manage it so that you focus on acquiring more assets to add in your current investment portfolio. For instance, you will hire someone to become a rental managers in Alabama, Birmingham where the property is located. You may assign the tasks to them so that you can still manage other tasks to expand your business.
Pros:
You are your own boss that controls all business decisions. You also own the property and earn all profits or pay your employee in a fixed-rate.
Cons:
Bad tenants may affect your operations especially if they are always delayed in paying rents or intentionally destroying some major parts of your property. That’s why it is imperative to conduct tenant profiling to know if you can let them rent it out. Also, losing money once you decide to sell the property is possible as well as incurring higher insurance and liability expenses.
Joining in a Partnership with Reputable Associates
This type of partnership might consist of great investors or members in your family. However, you must ensure that they are capable in what they are doing. It includes knowledge, experience, work attitude, financial standing and passion in managing a property.
Since we are discussing partnership which is a legal form of business, you must prepare a written agreement or contract containing the partners agreed terms and conditions, contributions, and division of profits. It has to be notarized and submitted to legal authority. This is for equal distribution of net income, liabilities and labor needed.
Pros:
You will have higher net income and share the same level of decision making and profits. You can seek assistance from your partners anytime you need.
Cons:
Conflict between both parties may arise especially if you do not have common objectives and purposes. Issues in managing the property can be confusing especially if the agreed system on the contract is not being followed. You may also experience the risks mentioned in direct ownership from the previous paragraph.
Engaging in General or Limited Partnership
This type of investment is usually advertised in print media, lending institutions, newspapers and by real estate groups. In this option, you let other professionals manage your investment. Take note that you must conduct an intensive background check against the sponsors or professionals you plan to deal with. It includes checking their past tax returns, credit report, previous investment, civil litigation and anything related to their financial and personal reputation. This will help you identify if they are trusted and experts.
Pros:
Great return of investments are possible without being stressed out in doing its day to day tasks. You do not need to be physically involved but just invest your competitive funds and the sponsors will be one who will do the necessary job on your behalf.
Cons:
Since you are just investing your money, you have no complete control over its daily operations. Numerous sponsors are doing illegal activities in the business that may bring you high net loss or low returns.
