Real estate is one of the most popular alternative investments for investors looking to diversify their portfolios. Preferred real estate investments refer to real estate investments that are particularly attractive based on factors like lower risk, higher return potential, favorable tax treatment, greater liquidity, etc. In this article, we will provide an overview of preferred real estate investments and discuss the key factors that make certain real estate assets stand out over others.
Direct Ownership of Residential Rental Properties Has Advantages
Owning residential rental properties directly can provide steady cash flow, appreciation, depreciation tax benefits, and a tangible asset. Single-family homes, townhouses, and small multi-family properties are relatively easy for individual investors to finance and manage. The key is finding properties in growing areas and keeping costs under control.
Real Estate Investment Trusts Offer Liquidity and Diversification
Real Estate Investment Trusts (REITs) allow investors to gain exposure to large-scale commercial real estate projects. REITs provide liquidity, professional management, diversification across sectors and regions, and potential for growth and income. Some REITs also offer preferential tax treatment of dividends.
Real Estate Crowdfunding Opens Up Access for Small Investors
Real estate crowdfunding platforms allow investors to pool funds to invest in real estate. Investors can gain exposure to properties and markets that would normally be out of reach. Real estate crowdfunding offers low minimums, risk diversification, and a more passive investment approach.
Choice Location Real Estate Has Higher Demand
Not all real estate is equal in terms of investment potential. Properties located in major urban centers, tech hubs, vacation destinations, and upscale neighborhoods will generally see greater demand from tenants and buyers. Investing in real estate in desirable and economically vibrant locations can pay off.
In summary, preferred real estate investments provide features like predictable cash flow, moderate risk, inflation hedging ability, and tax efficiency. Direct rental property ownership, REIT investing, real estate crowdfunding, and investing in desirable locations are strategies that allow investors to target real estate assets with higher return potential.