How To Invest In Alternative Real Estate Investments
Investing has never been this hot, and with more investors starting their journey, many are looking for less crowded places to invest. Alternative Real Estate investments are more attractive than ever.
Alternative real estate investments can be attractive to many investors. While some alternative real estate investments may be risky, they can also have higher returns, additional tax benefits, and offer diversification for any investment portfolio. Investors that pursue these investments, can benefit from the unique benefits they bring to the table.
While there are near endless alternative real estate investments, finding the right fit for your portfolio can take some research to find. Get a headstart on how to invest in alternative real estate investments below!
Why Invest In Alternative Real Estate Investments
Deciding to invest in a big plunge for beginners. Deciding to venture off the beaten path of investments is not a decision to be taken lightly. There are many reasons you might want to start investing in alternative investments.
Investing in real estate, and alternative real estate investments are a great way to make your portfolio more stable, generate income, and even receive tax benefits.
Some of the benefits of investing in real estate are:
- Appreciation: Real estate makes a good investment because of the growth in rental rates and property asset value. Even alternative real estate investments have high appreciation rates, making for a higher-performing investment.
- Income: Real estate investments can generate recurring cash flow for investors, in the form of rents, interest payments, or even dividend distributions in private equity investments.
- Stability: Bond-like yields from recurring rental income, asset value growth over the long term, and the inflation hedge characteristics of commercial real estate can provide stability through economic changes.
- Tax Benefits: The two most important tax benefits are pass-through depreciation and long-term capital gains treatment. Many real estate funds or syndications deduct depreciation expense (a non-cash expense) from net income reducing taxable income and saving you money over time.
Traditional real estate investments are typically residential or commercial properties that are either rented or flipped for a profit, while alternatives are many various forms of investing in real estate such as note investing, land investments, and many more.
Real estate offers investors security, stability, and promising returns and deductions, making it a great fit for nearly any investor. Alternative real estate investments offer similar benefits, without the fierce competition of other investors.
Types of Alternative Real Estate investments
There are many types of alternative real estate investments that offer their benefits and challenges. For most finding the right alternate real estate investments comes down to your imagination and finding the real estate niche that fits your portfolio and goals the best.
Undeveloped land can be a great real estate investment for those investors who like to play the long game. You can choose to develop the land, or wait, and sell it for a profit when the time is right. Generally, land investments are part of a buy-and-hold strategy that is cashed out in the future.
Alternative Residential Investments
Home is where the heart is, and some investors see untapped potential in various alternative residential properties. Whether it is a mobile home park or even corporate housing, you can profit from residents paying monthly fees to stay and live at your properties.
Alternative Rental Investments
Both short-term and long-term rentals offer various alternative investments. From vacation rentals, Airbnb, or even student housing, you can easily invest in rental properties. Investors generate monthly passive income from their tenants, in exchange for property maintenance.
Financial Real Estate Investments
For those that would prefer to be in the backseat of investment, there are ways to invest without the headache of property management. Crowdsourcing, REITs (Real Estate Investment Trusts), and Mortgage Note Investing are ways to help finance a real estate investment and earn monthly income without handling tenants or properties personally.
There are many ways to invest in real estate. From rentals, land, commercial properties, funds, and residential properties, you can easily find a niche that suits your portfolio.
Some popular alternative real estate options are:
- Trust Deed Investments (Mortgage Note Investing)
- REITs (Real Estate Investment Trusts)
- Student Housing
- Parking Lots
- Mobile Homes
- Vacation Rentals
- Rent-To-Own Properties
- Corporate Housing
No matter what type of investment you choose, it is easy to find and invest in your alternative real estate investment.
How To Invest In Alternative Real Estate investments
If you are ready to start real estate investing, you need to know where to start. Depending on your real estate investment, the first step can vary dramatically. We cover the following ways you can invest below:
Who to Contact to Start investing:
- Realtor: If you want to pursue investing in the form of residential, rental, land, or commercial real estate to purchase, finding a realtor is the first step. Buying a property as an investor can vary from buying as a resident, so work with a professional who knows how to find you a potential investment and knows the local market inside and out.
- Lenders: Real estate investors often use hard money lenders to fund their investments, so if you plan to purchase properties this is also a great place to start. Additionally, if you choose to invest in mortgage notes, lenders will have a selection of mortgage notes that can be purchased (and potentially offer to service) for investors.
- Crowdfunding Platform: Online real estate investing platforms offer a way to digitally invest in real estate without property management through REITs (Real Estate Investment Trusts). On these platforms, you can invest small amounts for various real estate investments, and split the profits of those investments with others involved.
Additionally, you need to fund your real estate investments. These are the most popular options for Funding Your Alternative Real Estate Investments:
- Cash: Nearly all real estate investments can be purchased through cash, however as investments can vary in size, you may need large amounts upfront to purchase, or find other ways to pay for your investments.
- Loans: There are many types of real estate loan programs that are designed for investments. From hard money lenders offering short-term loans for flips, traditional mortgages, and commercial loans for business investments.
- IRAS: Certain real estate investments can be invested in with a self-directed IRA, such as mortgage notes, REITs, and others.
Before making any real estate investment always perform proper research. The Real estate market is ever-changing, and no two markets are the same. Research heavily into the type of investment you are making, your local market, and any lenders, firms, or companies you may work with ensuring they are legitimate to protect yourself from scams. Additionally, no investment is risk-free so ensure you only invest what you are comfortable with, as some investments may not see returns or may lose money.
Investing in alternative real estate is a great way to diversify your portfolio, generate passive income, and have less competition with potentially higher returns. Those investors are willing to brave higher risks and can see a less competitive real estate market, with room for growth.
Are you going to invest in alternative real estate?
About the Author: Catherine Way is the Marketing Manager at Prime Plus Mortgages: Mortgage Note Investing. She has created content for the following industries: Real Estate, Mortgage, Finance, Business, Real Estate Investing, and many more.