Are you looking to diversify your portfolio? Real estate investment has increased steadily, and some individuals are particularly drawn to the luxury market. Here are three choices investors may consider when looking to put some money into high-end real estate.
Investing in a piece of high-end real estate and leasing it to trustworthy tenants long term is one option. Or you could take advantage of the popularity of vacation rental websites and offer it up as a short-term rental. If you’d rather not manage the property yourself, there are plenty of turnkey services that can handle the entire rental process on your behalf.
Real Estate Trading
This alternative, also known as “flipping,” comes with more risk. An investor buys a property, holds on to it for a short time, maybe makes a few quick renovations, and then puts it back on the market, betting on improved property values for a return. Though it may be an exciting way to make a profit, it can also go wrong if values fall or the house doesn’t sell.
Real Estate Investment Trust
Purchasing a luxury property can cost six figures or more, but a real estate investment trust (REIT) offers investors another way to earn a real estate return with a smaller outlay. These trusts finance or own income-producing properties, like shopping centers or office complexes.
They’re set up similarly to mutual funds and allow investors to buy in, some for as little as $500. Most REITs are traded on major exchanges, and they must return 90 percent of their annual returns to investors. Though they may offer slow, stable growth, keep in mind that shareholders must pay income tax on REIT dividends.
Before jumping into real estate investment, consider your options and talk to trusted professionals for first-hand industry perspective.