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Starting From Scratch: What Does It Mean to Invest in Real Estate?

What Does It Mean to Invest in Real Estate? When writing about something as varied and multifaceted as real estate, there can be a bit of a conundrum in terms of the topics you end up covering. You either focus […]

By Ben Williams - 27 February, 2022
Starting From Scratch: What Does It Mean to Invest in Real Estate?

At My Rental, we’re lucky to work with a lot of people who are highly versed in the field of real estate, and that leads us to cover topics that appeal to those with money already in the market. However, we also want to provide information for those newly entering the real estate market so they can have a solid launching off point for their own real estate journey.

Today, we’re going to look at the question of what does it means to invest in real estate, and what options are available to you if you’re looking to start for the first time.

What is Real Estate Investing?

You may initially think the question of “what does it mean to invest in real estate?” is extremely simple, and on the surface it is. However, when it comes time to actually explain it, things can become a little trickier to get a handle on. In simple terms, real estate investment is using real estate to make a profit. However, that doesn’t explain what the “using” in “using real estate” actually means.

This is because real estate investment is an umbrella term that encapsulates many different facets of owning and monetising property. The list that falls under the umbrella includes buying, selling, renting, owning, managing and purchasing real estate for the sake of making a profit. Although these areas often get grouped together due to the fact that many real estate investors handle more than one of these tasks in the process of managing their asset, each has its own place in the real estate landscape and each can often be a role in and of itself.

This is also part of the reason that many people decide to use property management services such as My Rental. By utilising a 3rd party to handle the management and upkeep of an investment property, you can focus more of your time and energy on the areas which require more of your attention.

Different Types of Real Estate Investment

Just as the role of the investor comes in many forms, so too does the investment itself. There are many ways in which one can enter the investment market, each with their own pros and cons. This includes:

Investing in Rental Properties – One of the most common forms of real estate investment for new investors, buying a property to rent has a lot of upsides. It provides a consistent stream of income and allows the house to essentially pay off itself. The main issue associated with this type of investment is that you are still in charge of maintenance and upkeep, which can be quite time consuming and costly if you’re trying to do it yourself.

Real Estate Investment Groups (REIGs) – Want the benefits of owning real estate but don’t want to be overly hands-on with that investment? Real Estate Investment Groups may be an option for you. While they come with their own set of risks, they are known for protecting against personal liability compared to other investment forms due to them being separate from personal holdings. This isn’t often an avenue for first-time investors, but can be beneficial depending on your circumstances.

House Flipping – As you can likely guess from the name alone, this method can come with a lot of risks. It involves buying a property with the intention of either making improvements on the property to resell, or simply reselling the property as-is. The latter is predicated on the idea that the property already holds enough value to make a profit at the time of sale, and if that’s not the case, it can cause a lot of issues in the form of unforeseen mortgage and upkeep expenses.

Real Estate Investment Trusts (REITs) – This is one of the more interesting options on this list, due to it essentially requiring a company to use the money of its investors to buy property. In this way, the property that you have a stake in is akin to a stock, as opposed to traditional property investment.

While these aren’t all of the possible methods, and within those discussed, there are several subsections and distinctions that can be made, this list should provide you with an understanding of what can be considered a real estate investment.

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So, what does it mean to invest in real estate? Depending on your method, it can mean a variety of things. So, do your research, and try to look at various viewpoints when deciding which investment option is right for you. If you want more information on the Australian property market and property management services, explore My Rental’s real estate blog today.

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