What is Real Estate Investing
For many individuals, real estate investing is an alien concept. This is true even for people with experience in stocks and bonds, mainly because real estate is an alternative asset, as opposed to stocks and bonds that are categorized as standard assets. Real estate, as a result, can be difficult to access and afford. Fortunately, things are starting to look up.
Real Estate Investing Should Not Be Avoided
Unfamiliarity with real estate investing should not prevent any one from taking advantage of said opportunity. It can be a very lucrative and sustainable way of generating revenue, and can supplement one’s portfolio due to a number of benefits unique to real estate, such as:
- potential for appreciation
- portfolio diversification
- tax advantages
The main reason why people tend to shy away from real estate investing is because they don’t know where to start, which is an understandable fear. So what exactly is real estate investing?
Real Estate Investing Explained
A straightforward (though not exactly brief) definition of real estate investing is that it is the purchase, ownership, sale, or leasing of land and any of the structures and facilities built on it, for the purpose of generating revenue. It is broken down into three sub-categories:
Residential
Residential real estate investing covers properties that are residential in nature, which includes family homes, condominiums, townhouses, and any other property used as a living space as opposed to a commercial working space. However, there are exceptions. Properties with homes that have more than four units are not residential, but lumped in with the next category.
Commercial
Commercial real estate investing covers properties intended for business use. The lengthy list includes retail, office, land, or homes that are multi-family.
Industrial
Industrial real estate investing, as the name implies, are for real estate meant for industrial businesses. The main distinction between industrial and commercial is mainly the size and scope of the business use. Factories, storage warehouses, and power plants are industrial in nature.
Making Money from Real Estate
To invest in real estate, there’s a number of different ways, but they all fall under three types of investments: appreciation, interest accrued from loans, and rent. There are more details about real estate investing that need to be understood, but this should be enough for the basics. The important part for now is to understand that similar to other types of investing, real estate comes with its own set of risks and rewards. You need o learn how to invest wisely and to be ready to put in all the hard work researching. Future articles will delve deeper into the nooks and crannies of real estate investing.