Although, most financial planners, advise their clients, real property investing, should be, a core, component, of an overall, investment strategy, it is important, to fully, consider, personal needs, limitations, goals, and priorities, pursue the best paths, to proceed, and invest wisely, for one’s personal, overall, financial situation. Some invest in real estate, in a passive way, by purchasing, shares of a Real Estate Investment Trust (REIT), but, it must be understood, all of these are not created equal, and there are challenges, and limitations. Others become a shareholder, or minor/ limited partner, in someone else’s project. Another approach is investing in real estate, by purchasing specific, smaller, investment properties, such as two – families houses, and/ or, smaller single – family homes, A few participate in larger projects, because they are able and willing to. Regardless of, how one proceeds, it’s important to do so, smartly, and, in a well – considered, focus manner. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, what this means, and represents, and a smart approach to investing and participating in real estate.
1. Personal home/ residence: Although, most people buy a home, because it make sense, to them, and, many consider, it, a part of the so – called, American Dream, it would be wise, to consider, the price, neighborhood, and other relevant financial considerations.
2. Real estate investment trust (REIT): Some get involved, by purchasing shares in a Real Estate Investment Trust, which is often referred to, as a, REIT. These vehicles are somewhat similar to stocks, and, other securities, but, with certain, significant differences. First rule should be, to realize, every project is not the same, and some sponsors, have far better, track records, than others. Also, past performance is no guarantee, into the future. Another issue is, there is often, very limited liquidity, for these, during specific periods, so, if one needs, liquidity, these are probably, not for them. An REIT should be considered, when it right for an individual, after he carefully, realizes the advantages and disadvantages, as well as potential risks, and rewards. Buying these, means, one is buying a partial, or limited, ownership position, in a specific project.
3. Investment, residential property: Some are attracted to participate in residential, investment property, either multi – family houses, or, a single unit, which is being purchased, to rent, for investment purposes. Consider cash flow, rate of return, up – front funds, needed, reserve funds, and personal comfort zone, issues, related to the responsibilities of being a landlord.
4. Larger projects: Wealthier individuals often, participate, by larger investments. However, the same considerations, and what the risks, versus the rewards, may be, should be thoroughly, considered, from the onset!
For most, investing in real estate, as a component of one’s financial/ investment portfolio, is worth considering. However, before doing so, it’s important to do so, in a smart, well – considered, way!