Since one of our readers asked us to discuss the issue of real estate investment, let’s talk about it thoroughly, explaining all the ways in which you can invest in real estate and some tips to consider.
To say first of all that although investment in real estate has historically been more profitable than stocks, the fact is that it is a type of investment that requires more capital in most of its forms, or intelligent borrowing in other cases sell my house fast houston
But first of all, what is not investing in real estate?
Of course, it is not buying a house asking for a mortgage in the hope that the price of the property will rise. That is to strangle yourself financially, although it is possible that you can rent the property for a monthly price higher than the payment of the mortgage. Difficult, but possible. Otherwise, this type of investment would be considered risky having acquired a debt in a non-liquid asset.
In these moments, at least in Spain, even with a fallen property market that does not raise its head, a business opportunity has arisen around the investment in garages. And as you may have noticed, practically all cities are having more and more parking problems, facilitating the growth of parking, and causing an increase in the price of garages. In principle, the investment in garages promises to be very profitable for the next years.
What kinds of investment in real estate are there?
1. Investment in residential real estate.
These are properties such as houses, townhouses, apartments or apartment buildings, where we have the possibility of charging a tenant the amount stipulated during the duration of the contract.
2. Investment in commercial real estate.
Above all, they are office buildings and commercial premises. In the buildings of companies, we tend to be more likely to be financed by the bank, because the idea is to rent the different offices and plants to other companies or businesses.
3. Investments in industrial real estate.
From industrial buildings in industrial estates (bad business at this time) to all types of land for the industrial area.
4. Investments in shopping centers.
This type of investment does require a lot of capital. And there is a bubble of shopping centers in most cities. I think we do not need to explain what it is, because you have seen that a shopping center rents all spaces for shops, cafes, movies and large food chains such as Carrefour or Alcampo. Also nightclubs.
This business has been very lucrative for many years, and being so lucrative, caused many other entrepreneurs to launch into this business, and among them they are killing each other. Often you can already see some shopping centers with too many spaces without renting. And those increasing closed spaces show that they probably are not earning all the money they should.
5. Mixed investment in real estate.
Here we would go to the true billionaires, because this investment is practically all of the above but together. For example, the Dubai project, where an intelligent and heated city is being built that will incorporate the largest shopping center in the world.
6. Investment in land.
During the recent bubble, anyone could make millions with this type of investment. Often it was to make an investment in a rustic land, make another small investment in an envelope towards the hand of the town planning councilor for its requalification to developable, and “Tachan !!!”. The land tripled its value in a matter of days.
Others less addicted to the art of bribing mayors and councilors, what they did was to buy a large area of land and sell it in parts. In real estate, the value of the division means that we can earn more money.
7. Invest in real estate through REITs.
Real Estate Investiment Trusts (REITs) are a way to invest in real estate but as if you were investing in shares.
REITs are companies that invest in real estate assets with the idea of generating income and pay investors in the form of dividends. They are attractive because they are usually subject to very low taxation. However, it is a complex investment that would require explaining it at length, since they also invest in mortgage loans, shares in other REITs and shares.
REITs have a daily quotation, so their price fluctuates daily. Another advantage is that it is a liquid asset that we can sell quickly, but it carries risks.
8. Invest in real estate through shares.
Obviously, we can invest in real estate shares, and as the real estate market recovers, the shares would increase their value, in addition to the payment of dividends, in case they are distributed.