There are multiple ways of investing in real estate other than the classic residential properties. If you’re an OFW, knowing how to appropriately manage your hard-earned money has never been more crucial. It’s excellent to know that there is still steady OFW real estate investing alternatives while you watch out for money mistakes OFWs should avoid. Learn about the different types of real estate investments here if you’re planning to invest in one soon!
The real estate industry has shown to be a sound investment option in both good and bad times. You can use it to protect the money you’ve set aside for your and your family’s future. If you’re are one of active OFW or someone who has recently returned here from abroad, it’s time to consider the advantages of investing in the real estate market in the Philippines.
What are the types of Real Estate Investments?
There are many different forms of real estate investments, but the majority of them fall into one of two categories: Physical real estate investments, such as land, residential and commercial properties, as well as non-physical real estate investments, such as REITs and crowdfunding platforms.
Traditional, physical real estate investing can yield a high return, but it also necessitates a larger initial investment and might have substantial recurring expenditures. REITs and crowdfunding platforms provide a reduced financial barrier to entry, allowing you to invest in a variety of real estate for a fraction of the cost of a single traditional property.
There are several ways to become engaged in real estate investing, whether you have the time and money to invest in an investment property or not. Let’s have a look at a couple of the choices with their advantages and disadvantages if you are an OFW and looking to invest in it.
REITs, or real estate investment trusts, are companies that act as trusts and manage a portfolio of real estate investments. REITs, unlike many of the other possibilities, are considered passive investments. Instead of owning assets, you may invest in a REIT and get income from the properties that the business manages. On a stock market, you may buy shares in these firms. REITs allow you to participate in the real estate that these firms hold while avoiding many of the risks that come with owning real estate directly.
REIT is a company that invests in commercial buildings such as malls, offices, and hospitals. If you want to invest in commercial real estate but don’t have the funds to do so, a REIT might be a good choice.
- You may supplement your income without ever having to view, maintain, or own a property. When investing in a REIT, the workload of active real estate investments is completely eliminated.
- Depending on the REIT you choose to invest in, you might expect to receive regular if small, payments.
- Although many REITs are technically stocks, they may help diversify your portfolio and provide high liquidity because they are real estate assets.
- REITs are best used as long-term investments that produce increasing quantities of income over time; however, if you wish to make a lot of money soon, REITs will not be of assistance.
- REITs are also taxed more heavily than eligible distributions.
- Because you don’t own or manage any of the buildings or loans, you have limited influence over your REIT assets.
Real estate crowdfunding is a new method in which a group of investors combine their finances and invest in projects that they would not be able to fund on their own. This kind of investment, like REITs, requires very little capital upfront and is also considered passive.
Some real estate crowdfunding services are available to all investors, but many others restrict users to demonstrate a specific amount of income before participating.
Nontraded REITs, or REITs that do not trade on the stock exchange, are a common type of these investments. Nontraded REITs can be very illiquid because they aren’t publicly traded, which means your money will be invested for at least many years and you may not be able to get your money out if you need it. Keep in mind that many crowdfunding sites have only been around for a short time and have yet to survive a recession.
- Crowdfunding is an excellent method to diversify your investment portfolio without needing to make a large initial commitment.
- It gives investors access to unique chances that they may not have had otherwise, thanks to the support of other investors online.
- Unlike the other types of real estate investments, which may need upkeep and other maintenance fees connected with owning a home or land, there is very little work required, and the entire procedure can usually be completed online.
- The dividends received by crowdfunding investors are taxed.
- Some investment platforms may have a minimum income requirement, which may seem contradictory to investors who are drawn to crowdfunding because of the low financial barrier to entry.
- Users of crowdfunding sites may be charged a fee to utilize their services.
3. Raw Land
Raw land is a type of real estate investment that is purchased for commercial property or residential development.
However, acquiring land for development necessitates extensive market research, particularly if you intend to develop the property yourself. This form of investment is best suited to someone with a big amount of money to invest and a thorough awareness of all things real estate, including construction laws, zoning restrictions, and flood plains, as well as a knowledge of the local residential and commercial rental markets.
A land loan can also be used to buy raw land, especially if you want to develop it. Many raw land investors lease their properties to farmers for agricultural purposes or look for lands with development potential to sell at a higher price later.
- In comparison to many other assets, raw land is quite easy to get. It is far less expensive than developed acreage, business, or residential properties.
- Maintaining it isn’t too expensive. You won’t have to worry about making repairs or changes as often as you would if you were maintaining a building.
- When it comes to raw land, you have a lot of possibilities. You may buy and own the land, lease it, or even build anything on it.
- There are minimal tax advantages to owning vacant land. You won’t be able to take advantage of the benefits that come with a mortgage-backed investment in construction if you buy bare land.
- It’s possible that you won’t make a lot of money straight soon. If you’re purchasing and keeping land, you might as well wait for it to appreciate while renting it out for a variety of uses.
- Zoning might be difficult to understand. The reason for which the land you buy is designated might make or break your investment. Furthermore, regardless of whether a site is classified for residential or commercial use, getting clearance from the local township for any development plans might be challenging.
4. Commercial Real Estate
Commercial real estate is a term used to describe non-residential type of real estate investments. Commercial real estate investments include hotels, warehouses, offices, and retail businesses. These are also called active investments since they entail the investor owning and renting a facility to a company that will use it. You may generate additional cash flow by collecting rent or selling the property when its value rises, just as you do with residential real estate.
- Commercial real estate has a reputation for producing larger returns than residential real estate. Depending on the location you’re in, managing a business property might be profitable over time if you can afford it.
- The amount of revenue generated by commercial real estate determines its value in part. However, if your property is home to a thriving company, it may rise in value far more quickly than a residential property.
- Maintenance may not be as hazardous as it is with residential properties. Because you’ll most likely be renting commercial premises to companies, tenant-owner interactions tend to be more professional.
- When it comes to commercial investments, you must consider both the general public and your renters. You may require expert assistance to maintain your property up to code and to aid you in resolving any difficulties that arise.
- Commercial investments, on the other hand, are more time demanding. Instead of dealing with a few renters, you’ll most likely have to deal with many leases and more possible concerns.
- Because your investment property is open to the public, there is more danger all around. Property damage is a concern for both residential and commercial building owners, but commercial building investors may have more to worry about.
5. Residential Real Estate
Residential real estate is the most well-known and well-understood type of real estate investment. However, you may or may not be aware of a variety of residential real estate investments, ranging from micro-flipping to accessory dwelling units (ADUs).
Residential real estate investments are typically active, requiring considerable monetary and labor efforts from you, but they have the ability to provide substantial returns and consistent cash flow.
Residential real estate includes single-family dream houses that can be viewed from BRIA website, condominiums, and vacation homes, among other places where people live or stay. Residential real estate investors make money by collecting rent (or monthly payments for short-term rentals) from tenants, or by profiting from the increase in value of their property between the time they acquire it and the time they sell it.
Residential real estate investing may take various forms. It might be as easy as renting out a spare room or as complex as purchasing and reselling a home.
Different Types of Residential Real Estate Investments
1. Long-term rental
A long-term rental property is a piece of real estate purchased with the goal of renting it out to tenants. This property might be anything from a four-unit multifamily residence to a tiny single-family dream home. As an investor, you profit from these properties by receiving rent from tenants and/or profiting from increased property value if you chose to sell them later. When it comes to maintaining a rental property, some investors prefer to live on-site, which is referred to as an owner-occupied multi-family property, though this is by no means needed.
2. Vacation rental
Vacation rental ownership is analogous to long-term rental property ownership. You acquire a home, generally in a touristy region, and then rent it out (usually short-term) to guests who will only be staying for a few days. Because you or someone who works from home will have to constantly supervise the upkeep of the house between visitors, this might be one of the more labor-intensive residential type of real estate investments.
is a less severe variant of improving a “not so nice house “ into a “this may do” house type, where you may acquire properties for less than their future market worth and resell them rapidly, generally without extensive modifications. Traditional flipping is less profitable, but it is also less hazardous and expensive.
4. Flipping and micro-flipping
One of the most active investments you can make is flipping a property. When you flip a house, you buy a fixer-upper that needs a lot of work, then fix it up and turn it into an ideal dream home and sell it. This is hazardous since you’ll have to put a lot of your own money into the property, and there’s a potential you’ll run into more issues and lose money instead of making money. However, if all goes according to plan, you might make thousands of dollars from the transaction.
- If you know what you’re doing, you may potentially make a lot of money on your investment. Finding the ideal home in the ideal location might result in a significant increase in monthly income.
- Over time, the value of real estate increases. If you acquire a house, especially at a bargain, make repairs, and then sell it later, you’ll almost certainly earn a profit.
- Investing in real estate has financial advantages, including tax deductions, depending on your income level.
- Residential real estate investment may be highly costly. Remember, especially if you’re flipping a house, that you’ll have to put your own money into acquiring and remodeling the property, which might cost thousands of dollars.
- Managing real estate on your own may take a lot of time. Property maintenance and numerous landlord responsibilities such as collecting rent and managing repairs may take up a lot of your time.
- Managing a property is not a liquid investment, so you won’t be able to sell anything fast and use the money from your investment like you would be able to with other possibilities.
Bria offers a wide variety of dream homes perfect for your needs. Either you are looking for a new place for you and your family or on the lookout for a profitable house available (if you want to jump in into renting business). Bria’s website offers virtual tours that you can access at your most convenient time. Witness the true beauty of Bria community within your laptop or mobile devices.
360 virtual tours allows you to discover, immerse and interact with our house models, cruise our community, and many more features.