Property is a great way to diversify your investment portfolio. During periods of instability, this market shows low price volatility, which can become your reliable source of low-risk investments. Moreover, the state offers many programs and tax benefits to the owners to encourage the development of this market. It is no secret that the demand for square meters far exceeds the supply, and the pandemic and its economic consequences have significantly reduced the activity of developers.
So what are the most efficient ways to invest these days?
If you don’t have much money to invest, but want to start your real estate business out of something, then you might like the following ideas:
- Wholesale is essentially an intermediary between the actual buyer and seller. All you are required to do is find the right object, draft a contract, sign the agreement and take a percentage for your work. However, this option is not suitable for passive income, you constantly need to keep your finger on the pulse of the market in order to get the maximum benefit from your activity.
- Buying shares in real estate investment funds. This means that you don’t need to deal with the property at all, but you need to have a good understanding of the stock market to track the best deals. Antonia Medlicott from InvestingReviews.co.uk notes that the profit of a real estate company will not be taxed at the company’s tax rate. But you, as an investor, are probably going to have to pay income tax or capital gains tax.
- Real Estate Investment Corporation (REIT) is the association of several private investors to jointly finance projects. At the same time, they can choose any strategy and type of investment. Dmitry Leus, founder of Imperium Investment. Advises financing the construction of small houses to get up to 8% of rental revenues and up to 25% of sales. Leus claims that this approach can also be applied to commercial real estate transactions.
Residential or commercial property: which is best for investment?
Many equate commercial real estate with endless cash flow. In part, this is because commercial real estate has a wider target audience among tenants. This means more opportunities for investors. At the same time, commerce is highly profitable. But at the same time, there is a high price of entry into the niche.
The advantages of residential real estate include:
- low financial risks, because housing is always in demand
- stable passive income
- low entry threshold
- less bureaucracy
At the same time, investment return terms can reach 3-7 years, depending on the strategy you choose.