Real estate has become an increasingly popular investment vehicle in the last few decades. While many individuals think of real estate investments in terms of buying and then renting a property, several other investment avenues exist.
Purchasing a property to rent is the most basic form of investment, but individuals who want to avoid the issues involved with managing the property can turn to real estate investment groups. Similar to a mutual fund for rental properties, this group includes investors who own one or more units in a larger building or block. All properties fall under the management of a company operating the investment group.
Another option for real estate investors is the real estate investment trust (REIT), a company that pools the money of investors to buy a portfolio of properties. Investors buy and sell stock in REITs on major exchanges. This provides them with liquidity not available in other forms of real estate investing.
Other investors may also look into flipping property, which involves the purchase of a property for the express purpose of reselling it in the near future for a profit. These investors look for undervalued properties or those located in a particularly hot market. This strategy can work well, but generally requires ideal market timing and can leave investors with outsized losses when the market turns as it did in 2007-8.