5 Different Ways To Invest In Property

By: Jency
2nd Jan 2022
Rent & Invest

Investment within the property industry offers great potential and lucrative returns when done right. It can help diversify existing investment portfolio and also bring on additional income.

Unfortunately, many new investors don’t know where or how to invest in property. So, the deciding question will be – what is your investing appetite? To help find the answer, you need to first find out what are the different types of properties that you can invest in.

  1. Buying REITs (Real Estate Investment Trusts)

    REITs allow you to invest in property without a physical property. The mechanism of a REIT is often compared to mutual funds, and consist of companies that own commercial properties such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, which makes it an excellent choice for investors who don’t require a regular income and those who are able to reinvest the dividends to grow their investment further.

    Are REITs a good investment? Yes, it can be, but it can also be very diverse and complex. Some trade on an exchange such as stocks; while others are not publicly traded. The type of REIT purchased can greatly affect the level of risk taken, as non-traded REITs are more difficult to be sold and may be hard to value. Investors who are new to the market should opt for traded REITs, which can be purchased through brokerage firms just like buying shares in the stock market

    For that, you will need a brokerage account. If you don’t already have one, opening an account is easy and many companies require no initial investment, although the REIT itself will most probably have an investment minimum.

  2. Property Flipping

    Flipping is a short-term investment, whereby a property is bought and held for a short period of time to be quickly sold for a profit.

    Usually, property flipping is done is these two ways:

    1. Repair and renovate. For this approach, you buy a property assuming that its value will increase with certain repairs and renovation works. The works are done as fast as possible and then sold at a price that is above the total investment.
    2. Hold and resell. For this approach, you buy a property in a rapidly rising market, hold on to it for a certain period of time, and then sell at a good profit.

    With either type of flipping, there’s a risk that you may not be able to sell the property at a price that will be profitable for you. It is because the longer you hold the property, the less money you make because you’re paying your monthly bank instalment without bringing in any income.

    Be reminded that when profit is made from sale of real property, there is real property gain tax to be paid.

    Furthermore, if you take up loan or financing, an earlier settlement of loan may be subject to penalty charges imposed by the bank.

  3. Rent A Portion Of Your Existing Home

    If you do not like the idea of purchasing a home only to recoup your money little by little, you could first try renting a portion of your house. There are a few options to do this.

    Try renting out an unused room in your home. If you haven’t purchased your property and like this option, you can even buy a duplex and live in one apartment and rent out the next.

    The advantage to renting a portion of your house is that it’s less likely that the tenant will try to halt the rent payment when you’re in the same household.

  4. Buy A Rental Property

    To do this, you have to purchase a house where that combined monthly bank instalment payment, home insurance payment, and property tax payment are lower than the rent amount of the property. Some of the ways to achieve this is by purchasing the property in an area with high rental rates, or by starting off with a heavy down payment so that your monthly instalment is low.

    You might face two common disadvantages to owning a rental property directly. First, it usually requires a lot of cash up front – from the down payment to the necessary maintenance. Do a thorough assessment of whether your returns will be worth the money invested.

    The second disadvantage is the trouble in dealing with tenants. You’ll need to really assess tenants before letting them move in. You don’t want to be listening to your tenant’s financial struggles that are causing the payment delays, when you’re actually trying to reap the best returns upon your investment. If you’re the type to easily give in to people, you may be better off letting a property management service oversee the collection of your rentals.

  5. Investing in Commercial Real Estate

    This is a variation of rental property where you invest in office, retail or indsutrial warehouse property. Investing in commercial property is known to be generally more complicated and expensive than investing in residential properties. Which brings us to the question: Why do people still invest in it?

    It is mainly because commercial properties are more lucrative than residential. It is considered one of the best property investment types because of the remarkable gains that can be made.

    One of the biggest advantages is that, since the property is being let to a business, a multi-year tenancy will usually come in place. This tenancy may renew and extend continuously for 10 years or more. You will have a steady cash flow from this type of investment as your tenants won’t be moving out every year. The property’s value appreciation can also be higher in comparison to residential.

    There are a number of disadvantages as well. Commercial properties are often subject to the business cycle. In the event of a recession, business profitability will decline, and as a result, your tenant may not be able to pay the rent. They might even go out of business, and since commercial tenants come from all types of various business backgrounds, it may take a longer time to find new tenant.

    Commercial property investment is more suited for experienced investors who are able to withstand higher risks. It is important to get it right so as to avoid a very expensive learning curve in your investment.

The statement and information in the articles are the opinion of the writer and meant only as a guide. Any property purchase, rental or lease involve many legal issues and other complication depending on the individual facts and circumstances. Readers and Users are strongly advised to seek professional advise including from qualified and competent lawyers, bankers and/or real estate agent to verify the information and the statement before embarking on any purchase, rent or lease of any property. To the fullest extent permitted by law, we exclude and disclaim liability for any losses and damages of whatever nature and howsoever cause and arising including without limitation, any direct, indirect, general, special, punitive, incidental or consequential.

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