Real estate investing can be a lucrative way to diversify your investment portfolio. But it can be riskier than stocks and bonds, and there\u2019s no one-size-fits-all approach. Finding the right real estate investment option for you comes down to your risk tolerance, budget and experience in the field.<\/p>
As with any investment strategy, investing in real estate offers unique benefits and drawbacks.<\/p>
The many ways to invest in real estate vary by liquidity, investment minimum and time commitment. The best real estate investment for your portfolio hinges on your budget and stomach for risk.<\/p>
| Type of investment<\/th> | Consider if<\/th> | Look elsewhere if<\/th> | Minimum to invest<\/th><\/tr><\/thead> | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Real estate investment trusts (REITs)<\/a><\/strong><\/td>| You\u2019re seeking a highly liquid asset that pays dividends.<\/td> | You want to purchase or manage physical property.<\/td> | Low<\/td><\/tr> | Mutual funds<\/a><\/strong><\/td> | You\u2019re seeking a broadly distributed liquid asset.<\/td> | You want more control over which companies you invest in.<\/td> | Low<\/td><\/tr> | Online investment platforms<\/a><\/strong><\/td> | You want to directly invest in commercial real estate.<\/td> | You want to purchase publicly traded securities.<\/td> | Medium<\/td><\/tr> | Real estate limited partnerships (RELPs)<\/a><\/strong><\/td> | You\u2019re seeking a passive short-term investment as a limited partner.<\/td> | You want full control over property management.<\/td> | Medium<\/td><\/tr> | Real estate investment groups\/clubs (REIGs)<\/a><\/strong><\/td> | You want to own and rent property without managing it.<\/td> | You don\u2019t want to pay property maintenance fees.<\/td> | High<\/td><\/tr> | Buy a rental property<\/a><\/strong><\/td> | You want to become a landlord with full control over property maintenance and upkeep.<\/td> | You prefer a more liquid, hands-off investment.<\/td> | High<\/td><\/tr> | Flip properties<\/a><\/strong><\/td> | You have renovation experience or want to partner with a contractor.<\/td> | You lack the time and expertise to renovate a property.<\/td> | High<\/td><\/tr><\/tbody><\/table> | REITs<\/h3>Real estate investment trusts are a way to invest in real estate without purchasing physical property. Instead, you invest in a company that purchases and operates income properties. And you can do it through a brokerage account with an online trading platform.<\/p> REITs are a practical option for stock market investors seeking portfolio diversification. These trusts are bought and sold on major exchanges\u2014similar to stocks. And like stocks, REITs pay dividends.<\/p> The perk of investing in REITs is that they\u2019re highly liquid, which means you can buy and sell them quickly\u2014typically in a day. They also offer access to commercial real estate an investor might otherwise have difficulty accessing, including office buildings, apartment complexes, malls and hotels.<\/p> The major downside to investing in REITs? They\u2019re complex and lack leverage. With so many types of REITs, some are riskier than others. Beginners will want to stick with publicly-traded REITs.<\/p> Mutual funds<\/h3>Another option for investors who don\u2019t want to purchase property of their own is to buy into real estate mutual funds. These mutual funds pool the assets of multiple investors between REITs and real estate operating companies. And you can invest through an account with an online broker.<\/p> Like REITs, real estate mutual funds are also fairly liquid. But unlike REITs, mutual fund profits remain in the fund unless you sell. Mutuals funds also provide access to a broad sweep of assets with fewer transaction costs.<\/p> That said, when you buy into a real estate mutual fund, you have little say in the companies your money is invested in.<\/p> Online investment platforms<\/h3>Online lending platforms take a page out of the crowdfunding playbook to connect investors with real estate developers. To invest, you\u2019ll need to select a platform and open an account with the required minimum deposit.<\/p> Through these platforms, you can help finance a real estate project through debt or equity. In return for your investment, you receive monthly or quarterly distributions.<\/p> Minimum investments typically range from $500 to $25,000 and platform fees are typically a small percentage of the amount raised. Different platforms offer access to different types of real estate, and some are open only to accredited investors with a net worth of at least $1 million.<\/p> Compare online trading platforms<\/h4>\n <\/div>\n \n \n |