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Disadvantages
- In case you are buying and holding or lease it out, you are likely not to make much money instantly because you will have to wait for it to be appreciated.
- You may likely find it difficult to get the approval of the local township on what you decided to develop on the land if it is residentially or commercially zoned.
4. REITs
Real estate trust investments (REITs) are companies or organizations that protect and oversee several real estate investments. You may decide not to have your property and invest in a REIT to generate income for those properties that are managed by the company.
Advantages
- You don’t need to see, manage or own the property personally before you can make profits from it.
- You may decide to make a steady and small income depending on the type of REIT you invest in.
Disadvantages
- REITs will be of little help for you to quickly make a lot of money because they are long-term investments that can earn you growing amounts of money over time
- REIT will only allow you to have little control over your investments because you are not owning or managing any of the properties by yourself.
5. Real Estate Crowdfunding
Real estate crowdfunding allows investors to come together most especially through social media to pool their funds and then invest in opportunities they can’t finance by themselves. This kind of investment is not costly.
Advantages
- Real estate crowdfunding is a great way to transform your investment portfolio without the need of investing a ridiculous amount.
- This type of real estate investment tends to offer access to unique opportunities that investors might not be able to gain access to without the help of other online investors.
- There tends to be a little effort that was involved and the entire process tends to be usually done online. Unlike other real estate investments that require upkeep and other maintenance costs that are associated with the management of a property or land. Do you want to rent in Seoul?
Disadvantages
- Real estate crowdfunding investors tend to be taxed on the dividends they receive.
- There are some investing platforms that need you to meet a certain level of income before you can be able to participate. This is known to be counterintuitive to investors that are attracted to crowdfunding because of the low financial bar for entry.
- The platform for real estate crowdfunding tends to charge users fees for using their service.
Reasons to invest in real estate
- Real estate has a predictable cash flow
Cash flow is regarded as the net available income obtained from the investment after the payment of all operating expenses and mortgages. Good real estate investors ought to provide for you nothing less than 6% or even greater cash flow.
- Real estate appreciates in value
According to the National Association of Realtors, appreciation levels for real estate were discovered in 1968 to be 6 percent per year.
- Real estate can be leveraged
The major advantage of real estate is the use of borrowed capital in the means of increasing the potential return of an investment. The transactions made in real estate investment show the impact of leverage when a mortgage is used in the reduction of the amount of investor capital needed to purchase a property. Taking for instance, there tends to be 10 percent in the annual return on a $400,000 property with a $40,000 net cash flow purchased with cash. When you have already built up an equity position in an investment property, you can decide to leverage the investment for cash.
- Real estate provides equity buildup
The fact is that most of the real estate was purchased with a small down payment and the balance is provided through debt financing from a lender. This tends to build up equity.