Evaluating Real Estate Options

Despite its volatile past, real estate investment is slowly gaining momentum once more. This means that more and more people are beginning to consider it a viable option. One of the reasons that this type of financing is so popular is because people tend to understand it better than stocks or bonds. What many people may not know, however, is that there are several different ways to finance this particular venture. Each of these options come with their own unique set of advantages as well as downsides. It is important to choose the one that suits your financial situation and capabilities best. Here are the most common options:

Personal Investment

One of the most widespread practices that many people take part in is buying houses and then reselling them. In between, the buyers will ‘flip’ the house by renovating it and including more value-added features. This allows them the freedom to sell this house when they are done for a greater price than what they bought it for. This does not necessarily require a great deal of expertise, although you do need some time, money, and commitment to the cause. As you are handling everything on your own, you are responsible for coming up with the down payment, applying for the mortgage, and also selling the house at the appropriate moment. For some, this can be considered somewhat of a risk.

Trust Deed Investment

There are some people who would like to be included in real estate financing but do not actually want anything to do with the property. Such individuals prefer a hands-off approach when dealing with this type of venture. If this is what you are looking for, then trust deed investments is a more suitable option for you. This is where you provide a borrower with a loan for real estate. This real estate will be considered secured property. In addition to this being a hassle-free way of being involved in real estate financing, you also safeguard your money. This is because you can choose to take over the property if you are not paid back within a certain amount of time.


REITs are a little more complicated than the two options mentioned above. Here, you are not financing the property directly. Rather, you are buying shares for a corporation that owns several properties instead. Typically, most of the income is distributed as dividends. While this does offer the option of not having to deal with the properties directly, you do have to sort out other aspects. For instance, the dividends that you receive are not the same as buying regular stocks. You are not included in the same lowered tax rates as stocks.

Retail, Industrial, and Commercial Financing

This is financing on a considerably larger scale. This is when you purchase massive properties such as office buildings, warehouses, or retail areas. You then lease them out to different companies and entities. Industrial and commercial, in particular, are common areas of interest. However, while the potential for profit may be huge, you are also responsible for the enormous cost and expenses involved.

These are just some of the ways you can be involved in real estate ventures. You can now decide which one suits your abilities as well as your future profits.

Anum Yoon

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere.

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