Investing In Real Estate Is A GREAT Idea!

Sitting down wondering what you could invest in for a better future? Did you know that Real Estate Investing is the way to go? Investing can earn you income. Why? You can flip your property! I mean, check out ron legrand review net woth to see for yourself. Check out these several reasons you can invest as well.

Income from Rental Payments

Equity investments can also generate their own income stream using rental payments. Traditional, or common, equity ownership gives investors the right to lease the property to tenants to earn income through rental payments. There are a few key differences between debt and equity investment that affect income potential for each one.

Unlike a debt investment, which generally has a fixed rate of return over a defined lifetime, an equity investment generates rental income that can change over time, growing or shrinking in relation to market demand. Income potential is also based on occupancy rates, which can also vary for any given property. This means that equity investors may incur more risk to earn income, but they also have the potential to earn a higher rate of return.

Also, common equity investments don’t usually have pre-defined periods of ownership and can last indefinitely, giving an investor the ability to earn income until the property is sold. Real estate is a long-term investment, especially for equity investments, which gives investors the ability to earn significant income over time on a monthly basis.

Common equity ownership offers rental income potential, while preferred equity investments offer cash flow in a way that’s more similar to debt investments. Like a loan interest payment, preferred equity investments offer a fixed rate of return commonly referred to as “preferred return.” Due to its middle position in the capital stack, preferred equity investments receive payments until they’ve reached the agreed rate of preferred return after all debt investments have been repaid and before common equity investors receive their return.

Investing in Real Estate Equity Investments for Income

Common equity investments are easier to access than debt investments. Individual investors can buy an investment property and manage it on their own. However, due to the high sums of money, knowledge, and time commitment required for direct investment, individual investors are often limited in the number and types of properties that they can buy — and manage — on their own.

As with debt investments, pooled-fund investment options, such as mutual funds, REITs, and investment platforms, offer a way to invest smaller sums of money across several assets and asset types. Private equity funds are also available to accredited investors. While it’s more feasible for an individual investor to invest in a single-family home or duplex, a fund can give an investor access to investments across a wide range of commercial real estate in multiple locations at a fraction of the dollar investment size.

For instance, with Fundrise, you can invest in an investment plan, with a target diversification level that matches your goals containing a mixture of assets across the US.

How Real Estate Investments Earn Appreciation

Real estate has the distinctive ability to earn income and appreciation. An equity investor can earn a consistent income from rent payments while the property itself appreciates. When the property is sold, an investor can sell their investment and capture any property value appreciation in the form of capital gains in addition to any income already earned throughout the holding period of the investment.

Like rental income, property value can change with demand. While a debt investment can be structured to guarantee a certain rate of return, an equity investment’s reliance on the market makes it riskier. But, by the same token, it also means that an equity investment offers higher return potential. Appreciation potential can be substantial or meager depending on many factors, which makes it crucial for the investor to have the acumen necessary to choose investments wisely.

Real estate is a long-term investment typically lasting at least five years. Unlike stocks, appreciation for many properties is maximized over the course of several years, with value gains generally occurring at a slower rate. Although real estate may appreciate more slowly, property values are also less volatile with lower and fewer daily fluctuations in value in comparison to most, if not all stocks.

Investing in Real Estate Equity Investments for Appreciation

As we’ve already discussed, there are several ways to invest in real estate equity investments, including direct investment, mutual funds, REITs, and investment platforms. The investment vehicle used to invest in an equity investment impacts how an investor receives their return as well as how and when it is taxed.

For example, an investor with a direct investment can collect their capital gains directly from the sale of an investment. On the other hand, an investor with an investment through a fund may realize appreciation from the sale of a property through a fund distribution or through an increase in the value of the shares that they own. Each option brings its own advantages and disadvantages, which can make each option more or less preferable for an investor, depending on their financial goals and resources.

Regardless of how you invest in real estate, at some point, a rigorous underwriting process, which evaluates the aspects of a potential investment property, is key. If you’re investing independently, the onus for that underwriting process will fall on your shoulders, whereas, if you’re investing through a fund or platform like Fundrise, a team of experienced real estate professionals will handle the evaluation on your behalf. No matter who performs the underwriting, this due diligence process plays a vital role in determining whether an investment opportunity is financially sound.

As a reminder, look back at ron legrand review net woth. You can do it too!