When a bull market starts to reach maturity, investors need to dig deeper in order to find money making opportunities. One of the areas where there are outsize returns that investors can find with some extra work is real estate. Here are seven investment opportunities that are not to be missed.
Real estate investment trusts are a conglomeration of real estate investments put into one security. The best aspects of these securities are their liquidity and low transaction costs. REITs allow you to get steady returns along with some of the upside that comes with investing in real estate. At the same time, there is also some downside protection available to investors because REITs are diversified to an extent. REITs will pay a high dividend and can also appreciate in price. When you invest in REITs, you also are able to get the maximum possible information about your investment since there are laws that require the disclosure of certain information to securities investors. These securities are an easy way to get involved in the real estate market with a minimum of work.
2. Rental Properties
The returns on rental properties are steady and can be better than owning traditional stocks. Management agencies take much of the day-to-day hassle of being a landlord out of the equation. Of course, how much you make depends in part on your savvy in getting a good purchase price and figuring out what the rental market will bear. A buyers agent can help you find suitable properties for investment and can give you the advice that you need in order to get started in this area. You may even be able to charge enough rent to make a profit beyond just appreciation of the property value. This has been a profitable strategy for investors, even in the wake of the real estate turmoil in the Great Recession.
3. Hard Money Loans
Hard money loans are another way to profitably play the real estate market. This option, however, does not require that you own actual properties. Instead, you lend money to those who are buying the properties themselves. The benefits of this investment are that you get a high rate of return plus your loan is secured by real property that can protect you in the event of default. Hard money loans are generally paid back relatively quickly and are a means of financing for those who are looking to flip properties. Hard money loans will have interest rates that are markedly higher than usual mortgages and there is little downside if you end up owning the actual property that is underlying the loan. This allows you to have a high rate of return while preserving your time.
4. Become a Homebuilder
This means of investment has the potential to be among the most profitable types of real estate investment out there. Granted, it does require work to purchase the land and figure out how to build on it. However, the rate of returns from homebuilding can be astronomical. You do not have to be a large-scale builder in order to make money. All you need to do is find a suitable plot of land, subdivide it and then build houses on it. There is always a need for new house construction and when you become a builder you fill this demand. Alternatively, you can profit from homebuilding by making investments in publicly traded homebuilders. When the real estate market is hot, these tend to be sound investments.
5. Invest in Crowdfunding
This is a relatively new way of financing real estate that is a reaction to newer tax laws. Different builders or developers will seek investors on these platforms. You can then interact with the developers in determining whether or not you want to invest in the property. There are hundreds of different options when it comes to real estate crowdfunding sites. If you are going down this route make sure to invest plenty of effort into negotiating your funding agreement with the developer and memorialize it in a contract. This allows you to have nearly all of the returns associated with developing without having to do the work yourself.
6. Private Placements
This option is available to those who have a higher net worth. You can invest directly in a real estate project as a limited partner. When you invest in a private placement, you have an ownership interest in the project, but you cede management control to a general partner. This is an investment that you would typically make for the long term. Private placements are typically non-liquid. However, the potential profit profile may justify tying up the money for the duration of the project. Private placements have a higher upside than most traditional real estate investment, partially justifying the long-term usage of capital. Be prepared that the general partner will typically get a larger portion of the profits in exchange for their work in managing the real estate project.
7. Interval Funds
This is a newer type of investment fund that is gaining in popularity in recent years. This is a closed-end fund, but it does not trade on the public markets. Instead, the company will periodically allow you to sell your shares back to them at net asset value. You can buy these funds daily provided that you meet the definition of accredited investor and have at least $10,000 to invest in this type of fund. The reward for the lack of liquidity again is a higher rate of return. Interval funds can contain a variety of different assets that are usually not accessible to individual investors. These funds can be a versatile investment option that take advantage of someone else’s real estate acumen.