The U.S. housing and commercial real estate markets are on a slow upward trajectory and it is clear that the economy has climbed out of the giant hole left by the 2007 Great Recession. One of the most staggering statistics from this unsettled time was reported by FiveThirtyEight.com and it provides a sense of just how far the market fell.
Real estate owned by U.S. households fell by $6 trillion from 2007 to 2009
There are still unsettled markets areas across the country that are a step or two behind the real estate rebound that is happening nationally but in general the overall market is breathing easier. One of the benefits to tighter lending in real estate has resulted in an increase in creative thinking, which has produced a number of new investment opportunities. Looking for a way to diversify portfolios? Here are three options to consider.
- Real Estate Investment Trusts
A Real Estate Investment Trust (REIT) is a company that owns and operates real estate that produces income. It sells like a stock and offers investors a way to receive capital appreciation and income from real estate without the hassle of purchasing and maintaining a property. A popular option is Vanguard REIT Index ETF because it provides access to a wide variety of property types that include hotels, apartments and malls. This fund also has shares in more than 120 different real estate companies.
- Crowdfunding through Fundrise
Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large pool of people and is most commonly executed using the internet. Fundrise is a crowdfunding platform dedicated to local real estate projects. It provides opportunities for individuals with a range of different income levels to invest in their communities without the hang-ups and middlemen involved in the traditional real estate investment process. The platform started in 2012 and currently boasts more than 41,000 members.
- Buy a distressed property to rehab
Rehabbing distressed properties is not just for the hosts on HGTV shows! This one of the most hands-on options for real estate investing but it can also be the most rewarding financially and personally. There is no failsafe method for this process as each property can yield surprises but it starts with selecting a house that needs work in a good or emerging neighborhood. The next step requires elbow grease and an investment in renovating the property. The value of the property after completing the work would certainly outweigh the initial investment.
Making over a distressed property can also produce a few long-term tax exemptions that savvy investors can use to their benefit. For example, you can establish residency at the property for two years, which will help with the capital gains tax. Once the property is sold you can profit up to $250,000 without being required to pay capital gain tax if you are single. Married investors can profit up to $500,000.
Closing Thoughts
These three featured options can provide a window into alternative ways for investing in real estate and with the commercial real estate and housing markets continuing a slow, but steady rise other investment opportunities will certainly arise.
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