How to Invest in Real Estate-Related Assets

Kudos if you’re gearing up to dive into real estate investing! Putting your money into property, whether buying your first home or expanding your investment portfolio with different real estate assets, is smart.

But let’s be honest—jumping into the real estate market can feel daunting. From picking the perfect investment type to grasping market trends and navigating potential risks, there’s a lot on your plate.

Don’t worry, though—we’ve got you covered. We’ll help you make informed decisions and start on the right foot.

Ready to Invest?

When exploring investment types, you’ll find a variety beyond real estate. Some are more risky and, as such, offer higher rewards than others, including Index Funds, Cryptocurrencies, Annuities, and ETFs (Electronic Traded Funds).

Real estate assets, dividends, stocks, bonds, and commodities are less risky and widespread. Let’s first consider dividends and stocks and then real estate assets.

1. Dividends, Stocks, Bonds, Commodities

Dividend investing is particularly appealing for those looking for a steady income stream. By purchasing shares in companies that regularly distribute profits, you can earn a reliable dividend income while benefiting from potential stock price appreciation. This approach is excellent for building a passive income over time.

Shares

Investing in shares of companies offers another path to grow your wealth. Buying stocks allows you to own a piece of a company, and as the company grows and profits, so does your investment. This method requires a keen eye for market trends and company performance but can be highly rewarding for those who do their homework.

Investing in startups can be exciting and potentially lucrative for the more adventurous. You become part of their growth journey by providing capital to new and innovative companies. While this type of investment carries higher risk due to the uncertainty surrounding new ventures, the potential for high returns can be significant if the startup succeeds.

Bonds

Many investors have bonds, as they are more stable than shares. Bonds balance out an investment portfolio, and the risk and returns are lower, so they are popular with retirees.

Did you know it’s not just Governments that issue bonds? Their bonds and Council bonds are considered safer than, say, company bonds. Bonds can be issued for special projects, such as infrastructure development, and the principal and coupon payments come from the project’s profit.

Commodities

You may know of investors with gold or silver. These are commodities, and investors hold them as a hedge against inflation. Oil is another commodity, as are other fuels and some agricultural products like coffee, sugar, and wheat.

2. Real Estate Assets

On the other hand, real estate assets offer a tangible and often more stable investment option, especially when invested for the long term.

REITs

For those who prefer not to manage properties directly, Real Estate Investment Trusts (REITs) offer an accessible way to invest in real estate markets. These trusts own and operate income-generating real estate, and by buying shares in a REIT, you can enjoy the benefits of real estate investing without the headaches of property management.

REITs can be traded on major exchanges, providing liquidity and ease of entry.  It’s not a giant leap from owning shares to investing in REITs.

Investment Properties

Investor newbies usually start out investing in residential properties. We all live in a home, so it’s a known entity and a safer option for new real estate investors. Many residential real estate investing types exist, including single-family homes, multi-family homes, condos, and townhouses.

Another type of investment home is a vacation rental home.  Investing in vacation homes can be profitable if located in popular tourist destinations. However, they require active management and are subject to seasonal fluctuations.

Investors often specialize in one or two property types and invest within locations they know well.  Investing in vacation homes requires additional knowledge and tolerances due to short-term lets,  use of cleaners, maintenance requirements, and vacation home app fees.

Residential real estate investing is also easier to fund as lenders require less downpayment than they do for commercial properties.

Commercial properties include office buildings, retail spaces, warehouses, and industrial properties, and commercial investors tend to gravitate to one type just like residential property investors do. Other commercial investing types include medical office buildings, senior living facilities, and retail stores in prime shopping areas.

Commercial real estate can offer higher returns with fewer maintenance requests and inspections than residential property. Still, you will need deeper pockets for the initial investment and knowledge of the laws and leases.

Real Estate Investing Portfolio

Diversification is critical to reducing risk and maximizing investment returns, including real estate.

Spread your investments across different real estate assets, including REITs and commercial and residential properties.

Geographical Diversification

Investing in different geographical locations will help you mitigate the impact of market fluctuations and specific property-related issues.

Invest in properties in different cities or states to spread out your risk. For example, if you live in a high-cost area, consider investing in more affordable markets with growth potential.

Combine properties in bustling urban centers with those in quieter rural areas. Urban properties might offer higher rental yields, while rural properties could provide more significant appreciation potential.

International real estate can offer unique opportunities and high returns for the adventurous. However, be aware of the legal and economic conditions of the country you’re investing in. For instance, investing in a vacation rental in a famous tourist country like Spain or Mexico could be profitable but high risk when you’re not in the country to deal with any urgent issues it may have, like guests damaging it.

Summing Up

There are many types of investment vehicles, such as stocks, bonds, ETFs, and Index Funds. Investors desire real estate assets for their rental income and capital growth.

Diversifying your investment portfolio would include many asset classes, including real estate. All investing requires research, a strong financial position and input from trusted advisors.