A tremendous amount of the wealth of the top 1 percent of Americans is built in real estate. Other then owning your home, it used to be that only the wealthy and well-connected were investing in real estate.
Unless you knew the right people and were willing to risk by putting up a good amount of money, there were comparatively only a few methods for the average person to invest in real estate, aside from just purchasing properties and renting them out for income.
Real Estate Investing has, however, changed drastically over the last couple of years, particularly in Los Angeles and Orange County, CA. Today, individual real estate investors have access to a variety of real estate-related investments. Moreover, new digital platforms for real estate investing in residential real estate (that don’t involve the headache of being a landlord) have also increased in the last few years as well.
Here are a few ways for individual Los Angeles Real Estate Investors to make profits in real estate investing both in Los Angeles and Orange County, CA.
Invest in REITS (Real Estate Investment Trust)
Real estate investment trusts (REITs) are a progressively popular option for real estate investing. You can get shares in a public REIT just like you would purchase mutual funds or stocks. The business model of a REIT is owning and/or developing income-producing assets in a specific segment of the real estate market.
For example, you can invest in a REIT targeting commercial real estate, such as: malls or office buildings, or a REIT specializing in residential real estate, such as apartments, multi family units or condos.
A handful of investment advisers recommend using REITs in your portfolio to balance out stock and bond funds and reduce portfolio risk, as this asset class often does well when other investments are performing not as well.
Before investing in a REIT, our Los Angeles Real Estate Investors recommend that you make sure to understand how the trust is designed and how value is derived from its holdings. Our Los Angeles Real Estate Investors also suggest that you keep in mind that the performance of a REIT is based on cash flow and profits from selling properties, and may not be impacted much by factors that generally drive the performance of stock and bond funds.
While most investment advisors today suggest considering real estate as an alternative investment, the majority recommend it should represent no more than 10-20 percent of your portfolio.
Take a Closer Look at Real Estate Investment Partnerships
An alternative way to invest in real estate is real estate investment partnerships. Current laws allow investment partnerships to be structured in numerous ways, including:
- Tenant in common projects
- General partnership
- Or limited liability partnerships (LLP)
- Or limited liability corporations (LLC)
These structures each have their own advantages and disadvantages, so always do your due diligence on your partners and potential liabilities before investing in a partnership.
Limited liability partnerships are constantly established having an experienced property manager or real estate developer as the general partner. Investors are used to provide financing for the projects, and they are typically brought on as limited partners.
Diversify Your Portfolio with Peer-Based Residential Real Estate Platforms
You can also invest in residential real estate through peer-to-peer (P2P) lending platforms. Just a few years ago, almost all P2P lending platforms making real estate loans targeted commercial properties.
Academics argue the real estate investment sector has matured enough to become a new asset class along with stocks, bonds and cash. That’s why it’s not surprising that most investment advisors recommend real estate should be a significant part of all larger portfolios today.
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