Wealthy, and those who aspire to be, investing in real estate can reduce risk and volatility in a portfolio.
Those with the money have myriad ways to play real estate. Some are easy, some are challenging.Here are a three ways :
Individual commercial Apartments.
5 units or greater are considered commercial real estate from which you can generate a healthy cash flow.As you pay down mortgage it will create equity and with reduction in expenses and increasing rents results in wealth building.It is also one of the easiest commercial real estate deals to get into with costs ranging from 700000 to 5 million.Below 700000 the roi is not worth the effort and above 5 million the competition is high.
Strip Malls and Storage.
These investments tradionally have been low-risk for buyers who like control, are well-capitalized, have a long time horizon and disciplined to manage it. They offer an alternative to a registered retirement savings plan (RRSP) or pension fund because income jumps once the mortgage is paid off.As an investor, you have to avoid getting caught up in the frenzy" of a hot real estate market.The key is The cap rate is the percentage you would make on your money if you had paid cash for the property. Return on investment,( ROI ), is what your return is when you factor in any financing. The higher the risk inherent in the property, the higher the cap rate should be.
Self storage are commercial buildings with rooms for people to store their stuff.The advantage is no missing tenants and easy evictions.Less maintenance creates quick cash flow and force appreciation but the Location is extremely important.
Savvy Investors are attracted to real estate investment trusts for their yield, but a look at the five-year history of the iShares S&P/TSX Capped REIT Index exchange-traded fund shows how volatile the publicly traded REITs can be.
Wealthy investors have the option of investing in private REITs, which are not traded on the stock market. In doing so, they give up liquidity for stability and safety of capital.
REITs, which are essentially property funds, will be hurt if property prices fall, or if the income the portfolio generates falls because of a weak economy.