Invest In Commercial Real Estate without Buying Property
What is a Real Estate investment?
Real estate investment is the purchase or sale of land and buildings to earn profits, and there are various options available to get into the real estate business. Real Estate categories include vacationing properties, apartments, houses, hotels and resorts, and many more.
Commercial Real Estate (CRE) includes office spaces, retail storefronts, or any building used for profitable and business purposes. These properties are expensive than residential real estate. These include properties like storage and warehousing units, shops and business units, and other offices that generate sales and profits.
How to Invest in Commercial Real Estate?
If you have the money, it is highly recommended to invest in a commercial real estate property to earn maximum returns and to explore more profitable opportunities.
There are Many Ways to Invest in a Real Estate Property Like:
- Purchase a rental property
- Real estate investment trusts (REITs)
- Crowdfunding platforms
- Short-term and vacation rentals
- Join a real estate investment group
- Trade or “flip” real estate
Different Ways of Real Estate Investment
It is now a trend to invest in real estate, not the traditional way but the conventional way that is without becoming the landlord. It has been futuristically predicted that the growth factor and prosperity in the real estate market will flourish immensely. Hence, it is the right time to invest in housing properties without dealing with landlord related work and tenant issues.
Let us look at ways through which you can invest in real estate without buying a property
1.Invest in Real Estate Exchange Traded Fund – ETFs
It is a collection of stocks or bonds in a single fund which are similar to mutual or index funds with the advantage of lower costs and broader diversification. Many ETFs are available in the market that provides ample exposure to the real estate market after considering all prospects and thorough research in the field.
2. Invest in Real Estate Mutual Funds
Just like ETFs, you can also invest in mutual funds. Again, it comes with lower costs and huge benefits.
3. Invest in REITs
People invest in REITs, as this is an added advantage to invest in real estate without acquiring the property. It helps in diversifying holdings and also supports non-correlation with any other type of equities. It also provides the right kind of exposure to the real estate industry without being a landlord. One needs to make sure that a consumer must always opt for publicly related REITs instead of going for non-traded REITs. A few factors to consider while investing in REITs are liquidity, fees, transparency, risk, and value.
4. Invest in a Real Estate Focused Company
Many companies are not actual REITs but own and manage real estate. The difference between both options is that the consumer needs to search and scrutinize various options before looking for the right company and a lower amount of dividend, which needs to be paid. These companies can be hotels, resorts, commercial real estate developers, etc. This requires a lot of time to research historical data, history, and other major details of the company.
5. Invest in Home Construction
There are plenty of prospective options to invest in home building and investing in the construction site of the real estate industry, a smart move. It is forecasted that there will be a boom in household construction in the coming years.
6. Hire a Property Manager
It is advisable to hire a property manager to do all the heavy work regarding managing the real estate business and to lead him to maximum exposure towards the real estate business. Property managers save a lot of time and effort from the investor and take care of the rental property like repairs, rent collection, vetting tenants, etc. They act as a medium of communication between the owner and the tenant, and it helps the investor to focus more on his profits and other personal and professional opportunities.
7. Invest in Real Estate Notes
One of the best options for investment is not to buy a brick and mortar building; instead, the investor buys Real estate notes, which are profitable. These can be purchased from a bank also.
8. Hard Money Loans
If the investor does not want to invest in real estate, he has a great option of providing hard loans and earns interest on it. The advantage is not to become a landlord but to be a creditor offering hard money loans to other investors in real estate. This golden opportunity also offers a high return on investment. These are direct loans, and it fetches him a minimum of 12% interest return on his money.
9. Invest in Online Platforms for Real Estate
There are many online websites through which investors can involve themselves in the real estate industry with the least of chances to get physically involved in this business.
10. Investing in Wholesaling Houses
It is similar to changing homes, but the owner is not with the investor, and he does not have to bear any maintenance cost. The only difficulty is to find the appropriate real estate property and to sell it for maximum profits.
It is a trend these days that investors and real estate facilitators invest in commercial properties to maximize their income and returns on their investments. It is a highly lucrative business that invites heavy investment opportunities from the stakeholders and, in return, the opportunities to explore vast opportunities within the real estate market and fund other personal and professional businesses are much higher. Commercial real estate investment is quite different from residential real estate funding in which the investor has umpteen options to invest in and earn maximum profits.
CRE Investing Without Property FAQs:
Many companies that have initiated this profitable investment to help investors buy and get involved in formed groups to finance real estate without getting actual ownership of the property. They let out funds and capital to invest into commercial real estate or residential properties and in return they receive regular cash flow and multiple distributions in return.
This kind of investing is quite similar to investing in REITs wherein the money is pooled in as cash from different investors who collectively take benefits of the singled-out platform from where they operate and function.
The cash pooled in and invested may be used for purchasing commercial real estate, apartments or buildings, warehouses, infrastructure and much more. Consequently, they derive the benefit of the dividends and multiple distributions of their investments which also converts into long term appreciation of the buildings that have been purchase using their capital, but no ownership was gained. This relieved them from the headache and fuss of the maintenance and upkeep pf the property.
Hard money loans are the best way to invest in properties and commercial real estate without taking he headache of keeping the ownership of the property. When a stakeholder has enough cash and capital to lend and he does not want the liability of being the landlord, all he has to do is to lend it to another investor who works on the property. This way the lender gains maximum exposure, a great ROI – Return on Investment thus saving on a lot of time, inconvenience and effort. Hard money loans are direct loans to a real estate investor and in return a handsome rate of interest is attained as a profit. Normally these loans are given out to people they know instead of lending a huge amount of money to strangers.
So, it is a great strategy to invest in property without attaining ownership of the same.
Going by the experience of many investors, it is a sound option as the rate of profitability is quite high and the hassle of physically acquiring a property is nil. May have shared a positive response after purchasing real Estate notes from known and credible people and from banks at purchase prices which are much lower than what a retail investor would pay.
When the investors don’t have the time or patience to physically deal with real estate, it is better for them to hire professionals as property managers and acquire their expertise in managing their asset. The benefits of hiring a property manager are as follows:
- Experience and expertise
- They have the mindset of an investor and act like one
- They have incredible patience to deal with situations which the owner normally loses
- Aggressiveness and professionalism are the basic qualities
- Strong PR and communication skills make them apt for the job
- Their organizational and leadership qualities help in managing the entire hierarchy of employers
- They are quite flexible and tech savvy
ETFs are Exchange Traded Funds which are kinds of bonds or stocks purchased by the investors in leir of CRE purchases without ownership. REITs are Real estate Investment Trusts that invest in hotels, office buildings, manufacturing units etc.