Real Estate Investment

Buying an Investment Property Overview: Investing on Your Own vs. a REIT

The concept of buying an investment property isn’t as straightforward as one might think. Sure, you could buy a home, clean it up a bit, and put a “For Rent” sign up or even try to resell it, but there is no guarantee that you’ll be successful with this standard strategy. Moreover, even if you want to try flipping a home and selling it, the entire process is challenging to do so on your own – especially if you don’t have much experience.

A lot goes into purchasing a property, fixing it up, remodeling, trying to sell, etc. Even if you want to rent it, you’ll still need to invest in landlords’ insurance and go through a screening process to find the right tenants. What if you can’t find any people who seem responsible? A criminal background check for each applicant is essential as well.

Since these processes might not be ideal for you, there are other ways to invest in real estate without actually buying an investment property. For example, there are REITs or real estate investment trust funds that involve the financing or owning of income-producing properties across a broad range of sectors, in the residential real estate, commercial, industrial, and so forth.

These types of real estate companies have to meet several requirements to qualify as REITs. Most of them trade on the major stock exchanges and offer many benefits to investors. However, some don’t trade at all and use different strategies to build growth over time, from the initial acquisition stage of buying an investment property to the liquidation or disposition stage.

Buying an Investment Property With REITs

The steps in between consist of renovating to add value to the property and then stabilize and hold as the renovation process is finalized. The “forced appreciation” means that the REIT can hold onto the property over a long period, waiting for its value to appreciate naturally. Keep in mind that it can take years for this to happen.

Regardless of which route you take, real estate is a long-term investment. So many investors prefer REITs because the hard work of renovation, remodeling, or even construction of new buildings on the property and maintenance is in the hands of somebody else. You won’t have those responsibilities to worry about.

Where can you go about buying an investment property or investing in a REIT that focuses on a profitable sector? DiversyFund might be a good place to start. It offers a unique business structure that does not involve any fees. They do everything in-house, so there are no third parties like management fees or broker fees to deal with.

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