Real Estate Investment without Physical Property – Part 1

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In 2018, housing market made great achievements, thanks to the tightening inventories and low mortgage rates. In some countries, housing prices rose by more than 10%. As cited by Jeff Rose on Forbes, the increase was evident not only in the big coastal cities but also in inland areas of Buffalo, Atlanta, Georgia, New York, Ohio, and Cincinnati. So, should you choose real estate investment this year? Or, are you late to do so?

In the past, real estate investment was represented by the ownership of lands. However, should you be a landlord in traditional meaning to invest in real estate?  The technology offers other options of real estate investment without you having to buy property this year. What are they?

New Ways of Real Estate Investment

Real Estate ETF

Instead of becoming a landlord, you may choose to be a real-estate ETF investor. Exchange-Traded Fund (ETF) refers to a collection of bonds or stocks in a single fund. The ETF has something to do with mutual funds or index funds. They all come with broad diversification. In other words, if you want to invest in real estate and diversify your investment options, then ETF can be a smart choice.

real estate investment

There are many options of ETFs, which offer the investors with access to real estate investment. Examples include Vanguard’s VNQ and IYR. They are ETFs, which invest in stocks issued by REITs (Real Estate Investment Trusts). Meanwhile, REITs purchases business buildings, like hotels, office buildings, as well as other property types. In other words, investing in EFTs means investing in real estate.

Real Estate Mutual Funds

This type of non-physical real estate investment works as ETFs do. Examples of real estate mutual funds include DFREX and TIREX. They offer the investors with some advantages, including low costs, better records of accomplishment, and broad diversification. With these qualities, investors feel confident about the future of their money and returns.

REITs

Investing in Real Estate Investment Trusts (REITs) is another type of real estate investment. You do not have to hold physical property. REITs allow you to invest with broad diversification choices. You can choose REITs that work in different type of real estate class. REITs work is a data-oriented system. Data allows them to make important decisions despite mood swings of the real estate market.

REITs are classified into two, namely non-traded REITs and publicly traded REIT. The US Securities and Exchange Commission (SEC) recommends the second type. The first type is often associated with high fees, lack of liquidity, and lack of value transparency. As a result, the risks are higher for investors.

Real Estate Focused Company

You can also invest in companies, which are real estate-focused. They include hotels, timeshare companies, real estate developers, resort operators, or real estate developers. What you do is buying the stocks in these companies, instead of holding them physically.

Just like investment in stocks, you need to do comprehensive research on the companies before buying their stocks. Information to consider include historical data, financial status, company history, customer satisfaction records, and many more.  To diversify, investors can buy stocks from different real estate-focused companies.

Besides the above-mentioned options, there are some other types of real estate investment, for which you do not have to hold the real estate physically. Check them out on the next post.

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