November 13, 2020
When one thinks of investing in real estate, what comes to mind? The first idea is definitely of Real Estate Investment Trust (REIT), or properties such as a building for rental purposes. But being popular doesn’t necessarily imply that they are always profitable. Sometimes the lesser-known alternatives can result in a significant amount of productivity and bring about more money than the popular ones. So here are some of the non-conventional ways to invest in real estate which might turn around the conventional real estate investing ideas:
Coworking Spaces – The popularity of coworking spaces is escalating at an astonishing rate within just a little over a decade of its debut. The industry has greatly enhanced from being an offbeat idea of solopreneurs and freelancers to the largest trend in commercial real estate. Coworking spaces are profitable ventures for everyone involved. Each member can share the office cost, even if they are freelancers, looking for a desk to place their PC. Space providers can rent more desks than is available since not all the desks will be occupied all the time. Surprisingly, freelancers and startups are not the only ones utilizing coworking spaces. Over the last few years, reports say there has been a surge in sign-ups by large corporations too. With greater opportunities comes greater risks. One of the risks involved in coworking spaces is that of data privacy and cybersecurity as WIFI is shared among many at a time. Also, there's the risk of theft of equipment and access management.
Raw Lands – Buying raw lands comes with a lot of perks. The first is that it requires almost negligible maintenance. Whereas property owners are confronting losses with no rental incomes but inevitable mortgages during the pandemic. Moreover, the limited supply and the unceasing demand for land makes it more valuable. So land appreciates quicker than any other type of property. But investors should also be well informed of the risks of buying raw land. It will not generate any sort of regular income like rental properties do. It may also not gain a hefty capital gain at the time of being sold. Still investing in this alternative is a profitable idea in the long run.
Mobile Home Parks – Many investors find buying mobile home parks not interesting and ignore it. This opens up opportunities for the rest of the investors who are interested in owning new kinds of assets. It provides lower turnover rates which a quite beneficial. Also, they are unaffected during recessions. When the rest of the real estate market gets hit hard, the demand for mobile home parks surges. Among the risks involved with it comes a faster depreciation rate. Also, the biggest risk is that the exit plan isn’t definite like those of apartments and homes.
Real Estate Crowdfunding Websites – This new venture in the real estate investment options often deliver greater returns to the investors. It is almost like investing in REITs, except that it is less managed by SEC and there’s no need for a 90% payout of net profits to dividends. Some real estate crowdfunding websites let the investors offer fundings for specified properties. The greater the risk of the borrower or the property or both, the greater are the offered return. Although the biggest advantage is high returns, the greatest disadvantage is that there is no guarantee of the returns. Certain factors can negatively affect the performance of the investment.
Private Notes – Many real estate investors borrow funds to invest from individuals, rather than from banks. Money is borrowed with whatever interest rates and terms both the parties agree and noted down on private notes and signed by them. The more control one has over the investment, the greater is the potential of return. Private notes are more of a passive income compared to rentals. Once a note holder, all that needs to be done is to sit back and receive checks or direct deposits. But there is no business without risks. If the borrower defaults on the loan, the only solution is to hire an attorney and take the matter to court. The delay can be extended even further in case of bankruptcy.
Real Estate Syndication – Here, one operator is the main investor of the property, with few other partners who partly invest in the venture. They are known as limited partners. Therefore, real estate syndication offers one the opportunity to invest in large commercial properties. Also, the most beneficial reason to invest in real estate syndication is the ability to become a passive investor. Another great benefit is that one can enjoy high returns without confronting personal liability and credit risk. Though it mostly offers high returns, there’s always a risk of lesser returns than it was projected by the syndicator. Losing the status of a passive investor and legal protection comes under another risk.
Although some of these alternatives are easy to build up than the rest, there are still some factors involved before investments. Many of them require either greater knowledge, connections, or investor status, or a mixture of the three. Candidates interested in investing some time acquiring knowledge or building up connections with other investors, gain greater than average returns.