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Ways of investing in real estate

POSTED ON APRIL 29, 2020    

Real estate is one of the most-considered types of investments for many reasons. Some people say that demand for property will never really go away, so you’re always sure to find a buyer for the right price even during a crisis.

Others see the lease or short-term rental potential as a good way to keep making money on your investment. Of course, there is always the chance that the value of the property will rise, allowing you to sell it for more than you paid to get it.

If you’re thinking of investing in real estate, here are the more common ways to do that.

Buying real estate for future sale

Also known as “flipping” a property, this means that you buy a piece of real estate with the intent to sell it in the future. This can involve making improvements that can make the price go up, such as purchasing an empty lot and building a house on it, and getting an empty condo unit and furnishing it.

While location is perhaps the biggest consideration before buying any type of real estate, it is probably even more significant when you want to sell the property later on. Seeing if any commercial (such as malls), business (offices spaces, etc.) or infrastructural developments (like roads) are planned for the area is a good sign that prices may rise in the near future.

Buying real estate for lease or business

With this, you buy a piece of real estate (either commercial or residential) with the intention of making money off it without letting go of the investment. For example, you could buy a single condo unit and lease it out for several months or even run it as an Airbnb residence, if the building allows it.

If you purchase real estate that can be used as a commercial space, you can even choose to put up your own business there, or partner with someone whose operations need a location. That way, you won’t need to put up money and can get a share of the profits.

The advantage of doing this is that it lets you earn money without selling your property. This amount that you get can be put towards the monthly amortization or maintenance.

Investing in REITs

If you don’t have the funds necessary to purchase property on your own, you still have options. Real Estate Investment Trusts (REITs) are corporations that let you invest directly in actual, finished and operational real estate assets that already earn money.

To invest in an REIT, you buy shares to receive dividends. Locally, RA 9856 (known as the REIT Act) requires these funds to distribute at least 90% of their earnings as dividends. These shares will be available on the Philippine Stock Exchange once approved.

Like mutual funds, REITs pool and invest the money of different people in order to create profit. The major difference between these two investment types is that REITs own only real estate properties, while mutual funds can contain stocks, bonds and other asset classes.

Buying stocks of real estate developers

You can also become a part-owner of a real estate developer through buying its publicly traded shares. While this does not actually give you direct ownership of property, it still allows you to be one of the owners of a company that does own multiple developments.

You can get shares of real estate companies that are traded on the Philippine Stock Exchange through a stockbroker, or through the services of various companies that allow you to make decisions on buying and selling online.

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