Since one of our readers asked us to discuss the subject of real estate investment , let’s talk about it in depth, explaining all the ways in which you can invest in real estate and some tips to keep in mind.
To say first of all that despite the fact that real estate investment has historically been more profitable even than shares , the fact is that it is a type of investment that requires more capital in most of its forms, or intelligent indebtedness in other cases.
But first of all, what is not investing in real estate?
Real estate manhathan city
Of course it is not buying a house asking for a mortgage in the hope that the price of the property will rise. That is strangulation financially, although it is possible that the property can be rented for a monthly price higher than the payment of the mortgage. Difficult, but possible. Otherwise, this type of investment would be considered a risk because it acquired a debt in a non-liquid asset .
At the moment, at least in Spain, even with a fallen real estate market that does not raise its head, a business opportunity has arisen around the investment in garages . And is that as you have observed, practically all cities are having more and more parking problems, facilitating the growth of parking, And causing an increase in the price of the garages. In principle, the investment in garages promises to be very profitable for the next few years.
What kind of real estate investment are there?
1. Investment in residential real estate.
They are properties like houses, townhouses, apartments or apartment buildings, where we have the possibility to charge a tenant the stipulated amount during the duration of the contract.
2. Investment in commercial real estate.
Mainly they are office buildings and commercial premises. In business buildings, we are more likely to be financed by the bank, because the idea is to rent the different offices and plants to other companies or businesses.
3. Investments in industrial real estate.
From industrial warehouses in polygons (bad business at the moment) to all types of soils destined for the industrial area.
4. Investments in shopping centers.
This type of investment does require a lot of capital. And there is a bubble of shopping centers in most cities. I think we do not have to explain what it is, because you have seen that a shopping center rents all the spaces for shops, cafes, cinema and large food chains like Carrefour or Alcampo. Also nightclubs.
This business has been very lucrative for many years, and being so lucrative, caused many other entrepreneurs to launch into this business, and between them are killing each other. Often you already see some shopping centers with too many spaces without renting. And those growing closed spaces show that they probably are not making all the money they should.
5. Mixed investment in real estate.
Here we would go to the real billionaires, because this investment is practically all of the above but together. For example, the Dubai project , which is building an entire smart and heated city that will incorporate the largest shopping center in the world.
6. Investment in land.
During the recent bubble, anyone has been able to make millions with this type of investment. Often consisted of making an investment in a rustic land, make another small investment in an envelope to the councilman of urbanism for his re-qualification to urbanizable, and “Tachan !!!”. The land tripled in value in a matter of days.
Others less addicted to the art of bribing mayors and councilmen, what they did was buy a large expanse of land and sell it in parts. In real estate, the value of the division makes it possible for us to earn more money.
7. Invest in real estate through REITs.
The Real Estate Investiment Trusts (REITs) are a way to invest in real estate but since you’re investing in stocks.
REITs are companies that invest in real estate assets with the idea of generating income and paying investors in the form of dividends. They are attractive because they are often subject to very low taxation. Nevertheless it is a complex investment that would require explaining it long and wide, As they also invest in mortgage loans, stakes in other REITs and shares.
REITs have a daily quotation, so their price fluctuates daily. Another advantage is that it is a liquid asset that we can sell quickly, but it carries risks.
8. Invest in real estate through actions.
Obviously, we can invest in shares of real estate, and as the real estate market recovers, the shares would increase in value, in addition to the payment of dividends, should they be distributed.
Tips to consider.
When we invest in real estate, borrowing money is not bad as long as we have drawn up a plan for which the risk-return equation is striking. In fact, Most real estate projects are funded or participated by entities or partners, but we must bear in mind that there is a possibility that the project does not go as expected and we end up in debt. That is what happened to Donald Trump, who was seen owing billions to the banks.
And finally, US real estate investors do not play it when it comes to putting their investments in their name.
That is, if they buy 3 office buildings, they create 3 different companies . One for each building. That way, a company can endorse a new project, and in case of legal action, only the property in the company’s name could be taken, without being able to touch the rest.
The same is true of civil lawsuits in the event that someone is injured by the collapse of a plant or a roof tile falling on the head inside our property.
When investing in real estate, any big investor will advise you to do it this way.
But above all, in the real estate market, the time to enter, as in actions, is essential.
I do not know if I left anything out there. If someone has something else to contribute, do not hesitate to leave a comment. As in actions, is essential. I do not know if I left anything out there. If someone has something else to contribute, do not hesitate to leave a comment. As in actions, is essential. I do not know if I left anything out there. If someone has something else to contribute, do not hesitate to leave a comment.