Today's post is about the different types of real estate ownership, and what it can mean to your finances.
The most common real estate investments sold to the every day person is the interest of home ownership. However, there are other lesser known investments that can serve as a catalyst to financial freedom; some of those types include:
1) Commercial Real Estate Ownership
2) Section 8 property ownership
3) Turnkey property investments
4) Crowdfunded property ownership
5) Home improvement & Property Flipping
6) Gentrification
So you may have heard of some of these, but there are others you may not be aware of. In this post, i want to talk about the pros and cons of all 6 of these types of real estate investments and what they can mean for you!
Let's start with Commercial Real Estate Ownership.
In short, these include the owners of properties that rent commercial spaces to beauty shops, restaurants, corner stores, liquor stores, churches, shared business spaces (like we work) or virtual offices. These are everyday spaces that most people never think about, but yes...that old raggedy building that houses the beauty supply store is being rented and money is being made by the owner! Its literally passive income, a business is paying just to use your space on a monthly basis...its easy money (if you can find a tenant).
Next - Did you ever think of investing in low income housing?
Investing in section 8/low income real estate is the most guaranteed investment that most new investors can make. Why? Well simply, because the government is often time footing the bill for these low income residents (ie. guaranteed income for the owner). Now, i'm not saying that this type of investment is risk free...the common concern is the quality of tenants, and the stereotype that poorer low income people will not value the property or area they live it....however, this is often not a true statement, and is entirely based off the relationship the building owner has with his or her tenants.
Let's now talk about TurnKey Properties:
Now this is a type of property many people have not heard of. Essentially, a turnkey property is a property where you are the investor, but a company is hired to basically do all the property management for you....and often times the property management company will even help you find a tenant (shhhhh!). It depends on who you work with. A turnkey investment property is exactly what it sounds like- it is a property, where you can just turn the key, and the property is ready to be lived in (and subsequently) its ready to make money for its owner!
On to Crowd Funded/Time Share Properties:
I won't send a ton of time on this, but this is when multiple people take their money and pool it together to buy a property. You can sometimes think of it as a timeshare, however, it is usually lived in by someone other than the investors, and the rents and payouts are split in accordance to the percentage of equity each investor has agreed to.
Home Improvement & Property Flipping:
This means of real estate investment is self explanatory, risky and but can be high risk high reward game....or a big money pit. Be careful when doing this, and know the area in which you plan to do this....or you may lose BIG!
And lastly, but certainly not least...We have
GENTRIFICATION!
What is gentrification, simply explained, gentrification is when a neighborhood is left to decay. When decay has hit the highest peak, real estate developers or planners being to buy the real estate for extremely low prices. Subsequently, these developers begin pumping money into the neighborhood, fixing up the homes, removing any poorer person/buying the current resident's out and turning the once blighted neighborhood into a "Good neighborhood", with stores, jobs and other means of commerce. Unfortunately, often times that old resident's are prices out of their apartments and homes they may have lives in for decades as they would not be able to afford the rents that come along with these new prized developments.
Gentrification is generally seen as a cheap way for the rich to knock the poor out of nice affordable housing, and at its core, that is exactly what it is. However, I am of the mind that gentrification can be a good thing, but it has to be done by the right people. Usually gentrification happens in minority communities. These communities are notorious for their lack of economic activity, jobs and overall funds. Many of the resident's underwater on their mortgages (ie. meaning they owe more than the property is worth). Many of the resident's in these communities are poor, or are on some type of government assistance. Many of the properties are run down, and some theorize that the people that live in these communities simply do not care about the properties that they are in since they typically are not the owners of the places the reside in anyway. However, i have found this thinking to be false. Personally, I rely more on the probability that lack of resources, good jobs, city and government investments combined with complete lack of hope is usually the cause for blighted communities and subsequent crime and lower property values...but i digress.
With all that I have said, gentrification can be a good thing if done organically. Gentrification can be a good thing if done in combination of a crowdfund organization to be completed by the people who already reside in the neighborhood, (ALA black wall-street for example.
I hope this article has help you!
Have a great morning, and stay safe ya'll!