One of the largest and most important assets that someone can invest in is real estate! The general definition of real estate is an area of land, and also everything on it. This can include things that are already naturally on the land, like trees, or man-made things like houses. Overall, everything that is on that area of land belongs to the person who buys the real estate.
Five Types of Real Estate:
Commercial Real Estate: only used for business and commercial purposes (ex. Land with stores)
Residential Real Estate: used for living and housing purposes(ex. Land with houses)
Industrial Real Estate: used for manufacturing, storage, research, etc. (ex. Land with factories)
Land: vacant, underdeveloped, or agricultural areas (ex. Land with farms or orchards)
Specialized Real Estate: specialized property that is used by the public (ex. Land with parks)
When investing in real estate, several options could be taken. However, the majority of investment deals with residential real estate.
Residential Real Estate:
One of the most common options for real estate investment is to become a “landlord” by investing in rental properties. This real estate is purchased and then rented out to tenants that want to live there, and the landlord can profit from the paid rent. Another means of profit for landlords is the potential rise in property value after some time. This way, it can be resold at a higher price.
On the other hand, a more viable option for teens is investing in Real Estate Investment Trusts (REITs). A “trust” is the use of investor money by a corporation to manage income-producing real estate. Rather than actually purchasing property and personally owning, REITs are bought and sold on major exchanges like stocks and therefore behave like stocks. REITs offer dividends to consumers, and also can go up in value to be resold.
While each method has its benefits, the landlord technique of investing is probably more difficult to achieve as a teen, especially with all the time-consuming management that is required. Therefore, REITs may be the way to go if you are truly interested in real estate investment!
Written by Brian Caballo