2020 brings a tremendous opportunity to Americans.
With 10-year record low interest rates, it’s literally a better time than most other times in U.S. history to buy property. In the midst of all the craziness of this year, historic, global pandemic, racial unrest, economic upheaval, and critical presidential election, we cannot afford to take our eyes off the ball.
The proverbial ‘ball’ deals with minding our own business and building our personal financial house, of us and our family.
So now’s a good time to consider the many ways you can start investing into real estate this year. With millions of people having been laid off and hundreds of thousands of business owners impacted or shut down, many may not have the time margin or brain space to become HGTV rehab and flippers, or even rental property owners. Fret not. There are even more passive ways to get into the real estate game that we’ll look at than that.
Because it’s the least risky and least involved method of profiting from the real estate industry, we’ll start our look at various types of real estate investing with what follows.
1. Real Estate Investment Trusts (REITs)
A Real Estate Investment Trust (REIT) owns thousands of investment properties. If you invest into a REIT, you’re investing money into the company itself, not individual properties the company owns. Your investments appreciate in value as the company earns profits from its investments. It works like investing into a mutual fund, stock, or bond. You can purchase REIT stocks through Vanguard, Fidelity and other brokerages.
Investing in real estate through a REIT is the most passive option available. As such, it’s also the investment option with the least potential upside. In other words, potential returns won’t be as great as the possible returns of fix and flip deals or rental properties.
Pros of REITs
There are many benefits of investing through REITs. First off, it’s a passive investment opportunity – completely hands off like stock investing. Secondly, you can avoid double taxation with it. Unlike many other passive investment options out there, you enjoy a higher potential yield with REITs. You may own shares of large commercial or multi-family property developments through REITs. You also enjoy a high level of liquidity.
REITs give investors the opportunity to invest in the overall real estate industry like a passive stock investor. You may purchase shares of real estate investment trusts that own a diverse portfolio of properties or one that owns a concentrated portfolio of property types, such as apartment buildings or shopping centers.
Cons of REITs
On the downside, REITs are taxed as ordinary income, unlike rental property cashflow. These investments are also impacted by interest rates, which change often throughout the year. And lastly, the decision of which REIT to invest in can be challenging as many of them focus in on a singular type of property investment.
All-in-all, they are a great property investing option for those looking for potentially higher returns with minimal effort.
We’ll take a look at another passive and potentially more lucrative option for investing is real estate that has cropped up in the digital age – that’s your first clue of what it is, by the way.
Until then, if you are looking to invest in real estate or need a property management company to eliminate the headaches of landlording, contact Utz Property Management today at 410.332.4432 or just go here.