While the real estate market goes through fluctuations just like any other market, there is at least one major benefit that shouldn’t be overlooked. There is a finite amount of what can be bought and sold because the earth, as big as it is, is not getting any bigger! Or, in the catch phrase that has become so cliché, what you see is what you get. It can change hands and government can claim eminent domain, but we can’t manufacture more land and since the earth doesn’t spit out baby earths, what can be bought and sold is most definitely finite. There is only so much to go around. This is why investing in real estate is as safe a long term investment as you’ll get.
Riding the Tides of Market Fluctuations
Sometimes property rises in value almost overnight and sometimes it’s a buyer’s market where it just isn’t moving and so prices drop accordingly. If you are going to buy property as an investment, you need to sell when the market is booming (a seller’s market) and buy when there is uncertainty in the air and prices start dropping (the buyer’s market). If you aren’t in it for the long haul and aren’t one to keep abreast of market conditions to buy and sell with these sometimes unforeseeable market fluctuations, you can still make money in the real estate market without actually buying any property.
3 of Many Ways to Make a Killing without Buying Property
Before talking about 3 of the best ways to make money in real estate without buying property, a word should be said about the fact that there are really several ways to profit from this finite asset. Some involve more risk than others and some are quicker to return a profit than others. It’s all in how you approach investing and so you should choose the investment vehicle that is best for your style. Each has its own benefits and each has what could be considered disadvantages, but the underlying principle is the same. You can invest in real estate without actually buying any on your own.
1) REITs – When Is Buying Real Estate Not Buying Real Estate?
The reason why it is said that you can invest in real estate without buying any ‘on your own’ is because of an investment product called an REIT. To sum up a Real Estate Investment Trust, these are funds where a group of investors put their money into a fund which can either invest in Equity REITs (where commercial properties are bought and managed by the fund), Mortgage REITs (where the fund finances/lends to money to others who need a mortgage and Hybrid REITs (a combination of the two). These can be publicly traded REITs, Public Non-traded REITs and Private REITs and the type which you would chose to invest in would be dependent upon your personal trading style and the amount of risk you are willing to take on. One thing to keep in mind is that risk and profit are usually proportionate. Your profit increases with risk but with greater risk you could also lose more. Never buy any financial product without understanding the risks involved.
2) Online Investing
If your personal investment style is a more hands-on approach, the internet opens up a whole realm of possibilities to you through online (digital) investing. This is a relatively new investment strategy but to sum it up quickly, digital investing involves finding investment opportunities online and then doing the research to see if your investment into someone else’s acquisition of property would be worth your time and effort. How risky would these investments be and are you an accredited investor? If not, this option wouldn’t be open to you.
3) Private Equity Real Estate Funds
In a way, a private equity real estate fund works loosely in the same way as REITs. The operative word here is loosely. They are similar in that an investment management team does the actual buying and selling of properties to maximize profits, but the difference is in just who can place their investment capital into the funds. These are generally only open (as in online investing) to accredited investors and so the average person looking to invest in real estate without buying property would do best to look into REITs, traded and non-traded, depending on the amount of risk you are willing to carry.
So, there you have three of the main ways in which to invest in real estate without actually buying any property on your own as an individual. The trust you invest in might own the properties, but you personally will only own a piece of the pie. What a fun way to break into the market without carrying the risk of losing your proverbial shirt!