With so many strategies to invest in real estate and so many individual needs and expectations the answer isn’t the same for everyone. The three main components are experience, time and capitol. These can vary from one investor to another. With some you can hire a fee driven management company as to lower the time needed but this will also lower or remove any returns
REIT – Low Investment, Low Return, Low Time
NNN Retail/Industrial – High Investment, Low Return, Low Time
Multifamily – Med Investment, High Return, Low-High Time
SFR – Low Investment, Med Return, High Time
Office Space – Med Investment, Low Return, Low-Med Time
Hotels – Med-High Investment, Med Return, High Time
Below is an overview of a few real estate investments. Look them over and ask yourself if it’s a good investment fit for you. Please feel free to call and ask us more about an asset type. We love to talk to like-minded investors.
REITS represents a great entry level opportunity for investors with little money and even less time. A real estate investment trust (REIT) is a company that owns, operates, or finances income-producing properties. By law, 90% of a REIT’s profits must be distributed as dividends to shareholders. In short, REITs are dividend-paying stocks that focus on real estate. They typically have experienced management, some tax advantages but high overhead and lower returns.
Triple net lease (Single -Tenant) Retail, Industrial
Single-tenant or multi-tenant triple net (NNN) properties can provide some of the most reliable income streams in the commercial real estate investment industry but require a large up front financial investment and a little time. Multi-tenant is more hands on. In a Single-tenant (NNN) triple net lease, the tenant pays an agreed upon, monthly rental amount in addition to covering most operational costs associated with the property, such as: annual property taxes, insurance, and maintenance costs. It is slightly riskier in the case your tenant left it could be vacant for some time (depending on tenant and term). Typically, you would get all the tax advantages of depreciation, little to no management time from you and slightly better returns than a REIT.
Multifamily will typically have the best returns but need more money. It could take little to no time as long as you can keep a good management company. The advantage here are there are usually plenty of management company to choose from in any given market. Anyone who is interested in buying rental property will certainly want to take a hard look at multifamily investments. As with most real estate you receive rents, take depreciation while the tenants pay down the mortgage and typically the values appreciate. Multifamily typically has the highest returns but can also be one of the most time intensive in the case of bad management.
SFR (Single Family Residents)
SFR real estate represents a great entry level opportunity for investors with less money and lots of time. The idea is to buy a home, rent it out, collect income, and then sell the property later down the line. SFR investments allow buyers to benefit from potential rent growth, depreciation and house price appreciation, which in turn are dependent on factors such as location, unit type, unit condition, amenities, price point, and market dynamics. They are slightly more liquid than most other asset types as its easier to sell just one house. SFR have slightly higher return than a triple net lease or a REIT, require little less capitol but typically require the most amount of time of any real estate investment as you will need to self-manage to make a profit.
Hotels will typically have good returns but need more money. It will take lots of time as you can’t usually find management companies and will need to be hands on. When you buy Hotels most “Flags” or national brands will require you to do upgrades in order to maintain the brand. These upgrades can be millions of dollars. As with most real estate you receive rents, take depreciation while your customers pay down the mortgage and typically the values appreciate. Hotels typically have some high returns but are the most time intensive as you will have to self-manage.
Office space will typically have low returns and need more money than SFR or REITs. As of this writing the only time to be office space as if you are going to occupy it and are paying less than rent. This sector is overbuilt pre covid as many folks now work from home. These take slightly less time than a SFR or a multifamily but more than a NNN or managed multifamily.
Are you still asking; How do I determine the best investment? or what’s the best investment or best way to invest money? Is real estate investing a good fit for me? Should I invest in REITs, NNN leases, SFR or multifamily? What investment property or class is the right fit? What if I’m new to investing or is there a better investment for beginners? I have Capital, a self-Directed IRA or 1031 money, is multifamily investment a smart investment for me? What investment company will provide investment opportunities with good returns on investment?
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