Investing in real estate is one of the best decisions you can make for your portfolio, but you probably already know that. Do you know, though, that you have numerous options and opportunities to invest in real estate in Dallas and all across the United States?
Different types of investments are better suited to different investors and their goals for their careers and their portfolios. Whether you want entirely passive income or you are interested in having at least a semi-active part in your investment, there is an investment opportunity out there for you.
Investing with a Real Estate Investment Trust (REIT)
Perhaps the most passive form of real estate investment available today, when you invest with an REIT, you will not take direct ownership of the property you invest in. Rather, you’ll buy shares of the REIT itself, which will be worth a percentage of the development or developments that it invests in. You will then see returns based on your investment – usually dispersed on a quarterly basis.
Investing with an REIT looks and feels very much like playing the stock market, as you’ll simply be buying shares in the REIT and you can sell your shares whenever you like. Depending on the REIT, the buy-in rate is also fairly low, making it an attractive option for new investors. REIT shares are not eligible for 1031 exchanges, though, so you will be responsible for paying capital gains taxes when you sell.
Turnkey Rental Properties
Another hands-free option is to purchase a turnkey rental property. This kind of property will be move-in ready, and it will usually come with property management. Some properties even have tenants already living in them, so you can begin getting monthly or quarterly cash flow immediately.
Because these properties are often single-family homes, your income from the property will depend on having tenants living in it. A gap in tenancy can result in a significant loss of income, but a good property management company will work hard to retain tenants and to replace them quickly when necessary. Also, because you will directly own the property, when you sell it will be eligible for a 1031 exchange, which means you can defer paying your capital gains tax on the property if you purchase another investment property within a certain amount of time.
Crowdfunding Real Estate
The newest type of real estate investing around, real estate crowdfunding platforms were only open to people who qualified as accredited investors until recently. Because accreditation only reflected net worth and/or annual income, though, it was not the best indicator of a good investor, and as of last year, with the passing of Title III of the JOBS Act, now anyone with the funds can invest in real estate crowdfunding.
Like investing with an REIT, real estate crowdfunding is a form of equity investing, so you will not take direct ownership, and you may not perform a 1031 exchange if you sell your equity. However, this form of investing allows you to spread your investment capital over as many crowdfunded developments as you want, choosing exactly how much to invest in each.