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4 Types of Real Estate Investments

Real estate investment is a tempting venture for many people, and for good reason. It can be lucrative when done right, and there is something reassuring about having a physical property you can point to when talking about your assets and investments.

Finding success with real estate investment, however, can depend on making the right choices, like choosing what kind of investments you want to pursue. Each has their own pros and cons that can determine how effectively you can profit from them. In today’s blog entry, the GA Tax Liens team hopes to help you take that first step by explaining a few common options. Read on to learn more, and contact us today to ask about our real estate continuing education seminars!

Fixer Uppers

This form of real estate investment has been popularized by a slew of new television shows, and there certainly is a lot of satisfaction to be had from turning an old property into a beautiful new home. However, investing in house flipping comes with a lot of pitfalls to watch out for. It’s a great choice if you have existing experience or expertise in rehabbing homes, or if you’re looking for a relatively short-term investment, but there is a long list of risks to keep in mind.

Pros

  • Many resources and online support available
  • Typical gross return of about 20 percent
  • Comparatively short-term investment

Cons

  • Requires a big initial investment
  • Requires expertise or money spent on professional contractors
  • Can lose money quickly under the wrong circumstances

Rental Properties

Another common option in the world of real estate investment is to buy a good existing property and rent it out. It’s a long-term investment that can provide a steady source of income. There are also options of how you go about renting property you own — you can be the landlord or you can have a portfolio overseen by a property management company. As with any scenario in which you own land, however, there are a number of risks.

Pros

  • Provides a source of passive income
  • Relatively beginner-friendly for investors
  • Typical return on investment of about 9 percent

Cons

  • Requires a big initial investment
  • Can require a lot of time and effort
  • Many risks, including low occupancy, damage, high maintenance costs, etc.

REITs

For those who are uncomfortable with the idea of making the leap to investment property ownership, or those who can’t afford the high upfront costs, REITs are a good alternative. Real estate investment trusts (REITs) are like holding companies for real estate. They collect money from investors to buy properties, and then investors receive a portion of the profits in the form of dividends taxed at a low rate. It’s a short-term investment similar to house flipping, as most companies require investment in an REIT for at least a year or two, but there is much more flexibility than long-term investments like property ownership.

Pros

  • Shares can be traded like stock
  • Lower initial investment than buying property directly
  • Comparatively low taxes compared to property ownership

Cons

  • Varying rate of return
  • Little personal control over the investment

Tax Liens

As we have discussed in a previous blog, tax lien investment is a form of real estate investment done through the purchase of tax lien certificates, which represent a property owner’s delinquent property taxes. The investor pays off the outstanding amount, and then profits from interest and fees charged to the property owner as they then pay back the investor for their delinquent property taxes. Explore our blog for more information and details!

Pros

  • Can be a low initial investment
  • Successfully paid back about 90 percent of the time
  • Provides a consistent income
  • Return on investment up to 36 percent

Cons

  • Varying rate of return depending on state
  • Possibility of other liens or certificates
  • Risk of unintended property ownership

Choose Your Investments Wisely

Are you ready to take the first step into the world of real estate investment? Make sure you set yourself up for success by choosing a form of investment that works best for you! Keep an eye on this blog for an upcoming article on how to make an informed decision, and learn more about tax lien investment from GA Tax Liens! We offer classes and seminars for both beginners and seasoned real estate investors, and our priority is always to help you reach your goals. Explore our site to learn more about the real estate continuing education opportunities we offer, and register for your spot today!