Investing, to grow wealth, whether it's to bring in additional income, or to save for retirement comes with a variety of risks. Since real estate is a tangible asset, which almost always tends to rise in value, real estate investing may allow you to safely pursue relatively low-risk investment while still gaining substantial income and/or capital appreciation.
The type of real estate investments to pursue 2022 should be based on your specific interests, needs, requirements, and the length of time you plan to hold your money in the investment. The following are 11 potential low-risk real estate investment options you may wish to consider.
Real Estate Investment Trusts (REIT)
A real estate investment trust (REIT) involves a company that owns and manages real estate or finances income-generating real estate. Structured much like a mutual fund, shareholders get dividends from the income earned on the property. Also, a REIT has to pay out at least 90% of its taxable income. There are several types of REITs such as private, publicly traded, and public non-traded, investors can typically invest in a REIT with a fairly low investment amount.
Real Estate Investment Groups (REIG)
Real estate investment groups (REIG) involve investors purchasing real estate from a business or investment group that buys, builds, and renovates buildings, homes, apartments, and condominiums. Due to the diversity of real estate properties that are available, you may invest in the types of properties that interest you more. The REIG also allows investors to buy properties through operating companies. The operating companies still manage and market the properties while taking a percentage of income from the monthly rents.
Real Estate Mutual Funds
While mutual funds are investments in a range of vehicles such as bonds and stocks, real estate mutual funds invest in REITs and operating companies. With a small amount of capital, you may diversify your real estate portfolio with a broader selection of properties instead of just one type, like REITs. Investors may receive dividend income as well as capital appreciation.
Real Estate ETFs
Real estate exchange-traded funds (ETFs) are funds that consist of securities. These securities are real estate based, most often REITs, which are tracked as they can be purchased on the stock exchange. Once investing, you obtain dividend distributions. There is less risk with these investments, but there is also lower potential income. With a real estate ETF, you may only own part of the building, like a condo or apartment, instead of owning the entire building.
Real Estate Limited Partnerships
For a real estate limited partnership, several investors pool their funds together to purchase real estate. There will be passive investors who are limited partners and a general partner whose role is to manage the investment. This relatively low-risk investment approach is ideal when you are looking to invest in large development projects or when having limited funds on your own where you can pool your money with other investors. A partnership agreement specifies how income and asset distributions are disbursed as part of the Real Estate Limited Partnership.
Note Investing
When you invest in a mortgage note, you take the place of the bank, become the lender, and profit from interest payments and/or from the sale of the property. One major benefit of mortgage notes is that they are relatively liquid compared to other types of real estate investments. They can be freely bought and sold on the secondary market, which makes them accessible to any investor. The biggest benefit though is that they have the potential for strong returns without actually owning any real estate. Just collect the interest payments without any properties to manage, rents to collect or property taxes to pay. Investors typically use Notes to improve their overall returns or to diversify their retirement income.
Note Fund Investing
When you invest in a note fund, you are putting your money into shares of a privately held company that manages multiple notes. This allows you to pool your money and spread risk among the various assets the company owns. When investing in note funds, investors need to be aware that the notes are managed by a fund manager and supporting team. The Note Fund’s investment strategy needs to be in line with your personal goals and risk tolerance. If you’re looking for steady, passive income, it’s important that you choose the right fund.
Mortgage-Backed Securities (MBS)
This type of investment consists of a pool of loans that have been purchased from the banks that issued them. When you buy an MBS you are, in essence, lending money to people buying homes. Overall, this type of investment is considered to be safe with the potential to supply a steady stream of income. Mortgage-backed securities are guaranteed by the issuer, pay higher interest, and are easy to buy and sell.
Invest in Real Estate
There are several online real estate investment platforms, or crowd-funding real estate websites, designed to connect developers with investors. Real estate developers hope to find investors who will provide working capital to build and renovate projects. You are able to invest a set amount while receiving distributions on a monthly or quarterly basis. Investments on online platforms are speculative and illiquid as you can't unload them quickly. An investor typically pays a fee to use the platform and may require accreditation where you have to show a certain earned income for at least 2 years or have a specific net worth amount.
Conclusion
It is possible to find relatively low-risk investments with above-market in real estate. Just keep in mind that the lower the risk you take on, the lower the rate of interest you may obtain from the investment.
However, there are many opportunities where you can diversify your portfolio to have several investments reaching different rates of maturity, as you'll see a steady stream of passive income constantly flowing your way. In this circumstance, it will give you additional opportunities to reinvest and continue to build your wealth.
EquityBrix can help you grow your wealth through our fractional real estate investment platform. Our team marries the needs of investors and real estate developers by providing opportunities for above-market returns. EquityBrix is committed to creating high-yield investment offerings, and we can help guide you through the new era of real estate investing.
If you want more information about tokenized real estate investing go to EquityBrix or EquityBrix.com/Learn.
If you are looking to grow your wealth and diversify your investment portfolio by learning about innovative ways of investing in real estate go to EquityBrix, or contact us for more information, or sign-up for the EquityBrix Newsletter.
*Disclaimer: EquityBrix is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice. It’s important to be informed and to make your own investment decisions or do so in consultation with a professional financial advisor. Under no circumstances should this material be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of a written online prospectus relating to the particular investment.
FAQs
Is real estate a low-risk investment?
There are low-risk investments available when getting involved with real estate options, funds, and REITs. It will depend on the type of investment that you wish to get involved with and whether it involves purchasing and holding property.
How to invest in real estate without owning property?
You may get involved in EquitySlice, real estate ETFs, real estate mutual funds, and senior notes. Most investments that involve not owning property focus on purchasing securities or notes.
Will real estate prices go up in 2022?
The real estate market is always fluctuating. So there is no sure way of knowing whether prices will go up or by how much they will rise. However, economists and reports from the National Association of Realtors are predicting that prices may rise up to 5.5% in 2022.
*Disclaimer: EquitySlice is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice. It’s important to be informed and to make your own investment decisions or do so in consultation with a professional financial advisor. Under no circumstances should this material be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of a written online prospectus relating to the particular investment.
