This is my second post for Types of Investments . The first part talked about savings, stocks, bonds and mutual funds.
When talking about rental real estate, people are often referring to income generating rental properties. The idea is by putting down a percentage of the purchase price and then borrowing the rest from the bank to create income. When a tenant pays rent, this rent should cover the mortgage, insurance, property taxes and other monthly expenses. The rent can also include a property management fee. The goal is to have money left which is positive cash flow.
The downside to rental real estate it takes the average person a lot of money to get started. Also if the tenant moves out, then the owner of the property must now pay the mortgage. Rental real estate can have a high "Pain in the ass" factor for those who do not use a proper manager such as early, early morning toilet problems.
Is there a way for people to get involved in Rental Real Estate without being a landlord? The answer is yes. REITs, or Real Estate Investment Trusts, are income trust that buy real estate. A REIT trades on a major stock exchange. By law, a REIT must pay out at least 90% of their profits as a distribution to its unit holders. REITs can be involved in residential housing, apartment complexes, retail centers, office space, seniors housing, medical facilities etc.In order for a REIT to grow, it will issue more units (i.e. shares) to build up a cash . The yield on a REIT is usual high such as 6%. REITs make it easier for the average person to invest in commercial real estate as this would be really expensive.
Starting a business is one of the most profitable avenues that an investor can take. Starting and running a business is the hardest to maintain out of all the asset classes. When running a business as a corporation, the business can have enormous tax deductions.