Are you looking to diversify your cash? Well, real estate investment is one sure way to achieve that. Another great way is to inject your cash into alternatives to real estate investment.
Typically, when most investors sit down to figure out where to invest, the first options that pop up in their minds are forex trading and stock markets. However, there reaches a point when you start generating more profits and you may want to diversify your income streams.
So, should every investor go for alternative investments when they want to diversify their cash? Well, not necessarily. But you should learn about and familiarize yourself with the options available around your area.
Is Real Estate an Alternative Investment?
Before answering this question, you need to first understand what alternative investment is all about. Now, if an alternative investment is a brand new term to you, then let’s define it briefly.
An alternative investment is anything you can inject cash in via the traditional stock market or the 401ks. Any other thing that falls into bonds, cash and stocks may not be considered as an alternative investment.
And as with any investment, you must be cautious when injecting money into alternative investments. You can start small and grow slowly to control risks because no one is sure about tomorrow.
What Are the Main Types of Investment Alternatives?
Thank goodness that you don’t need to look any further to find investment alternatives apart from real estate. This article contains everything you might need. Read on.
1. Real Estate Crowdfunding
Real estate is one of the most common investment options around the globe. Crafty investors do real estate investment intending to rent. Others flip properties to earn a profit.
This is the niche that makes many people millionaires within no time at all. However, it is time-consuming and very intimidating especially to beginners and other investors who want to get rich overnight.
Real estate crowdfunding tops the list of the best alternatives to real estate investment. It is a great option If you want to diversify your earnings in crowdfunding platforms. It involves investing in properties without physically owning them. Most of these platforms require you to be an accredited investor while others do it differently because they don’t bother about certifications.
Peerstreet, Groundfloor, and Fundrise are just a few among the many options you can choose from. They allow beginners to test waters with as low as $10 investment.
2. Fine Art
Art is desirable to every one of us, right? Now, investing in art allows you to make extra money. This option has been with us for decades, though many people find it difficult to get involved.
It originally attracted accredited investors pooling their money in an art fund. Others would inject millions of money in well-known art, after which they would wait for that investment to gain traction. It is in real terms a risk worth taking.
Why should you invest in fine art? It is hard to believe that fine art beat real estate, gold, and classic cars in 2018 in the class of top-performing assets – a good reason you should invest in it. Check that with the Wall Street Journal.
To invest in fine art is interesting – you get to enjoy everything art while making huge profits out of it. For example, you can invest in MasterWorks fine art platform where investors buy shares in a painting, the same way you can buy shares in companies.
3. Online Business
Nothing feels better than investing in yourself. And this involves doing what you enjoy and do it to your best.
One way to invest in yourself is to start an online business – another great alternative to investing in real estate. So, what options are available in online business? You ask. Of course, you need to sit down and try to figure out what you can do best. For example, you can start a blog, an e-commerce website, drop shipping, freelance writing, virtual assistant work, or consultancy.
While there is no guarantee that your online business will flourish immediately, you are sure to reap big after some time and effort, especially if you are created with the entrepreneurial drive.
And just like any other investment, it helps to go for low-cost ideas when investing in an online business.
It is in real terms easier than you realize. Look at what you can do best. Check the skills you have, and figure out how you can make money in your specific market or industry.
4. P2P Lending
P2P is an acronym for peer to peer. Peer to peer lending is yet another good alternative to real estate. It allows people to lend or loan money to other people. You loan money to willing borrowers, who then return it with interest. As simple as that.
There exist many P2P lending platforms where you can invest and earn returns on the amounts you loaned to other people.
Prosper and LendingClub connect you to borrowers directly, so you don’t have avail yourself physically at the bank.
With its returns ranging from 4-8% depending on loan amounts and risks taken, you expect to rake in a lot of money within a very short time.
Financial experts say that P2P lending is a good place to test the waters and diversify your cash to increase your income.
There is very little talk about cryptocurrency yet it is a sure way for crafty investors to earn big. It belongs in the list of top alternatives to real estate investment. The fact that only a few people are talking about it online and offline does not mean that there is no value in investing in crypto.
Maybe you have heard people talk about Ethereum, Ripple, the most popular Bitcoin and other digital coins that have swept media headlines for the 3-4 years. Although the hype that was there originally has faded a bit, these coins and many other new ones are still alive and kicking.
If you want to go this route, invest cautiously because digital coins are currently not regulated, and they are highly volatile as compared to central bank coins. We hope this is going to change shortly.
It helps to do your homework well before investing in cryptocurrency. Good luck!
What is a commodity? It is an economic good or service. Talking of investing in commodities, we look at things like crude oil, coffee, sugar, natural gas, gold, platinum, silver, diamond, cocoa, wheat, corn, soybeans, and many other precious goods.
You can buy them from your investing platforms. For the metals, buy them physically from sellers and then resell them at a profit.
7. Raw Land Investment
While it is easier for farmland to fall in the real estate category, it is a special investment that should be separated from the former. If you go this route, you are sure to increase your earnings within a very short time. Though not many people ever think about investing in farmland, it is still a great alternative to real estate investment.
As an investor, you can easily make money when the value of land increases over time or though rent and lease payments of the land. You also get to enjoy a lot of perks as compared to real estate, for example, farmland is more hands-off than real estate. There’s also little repairs and maintenance.
You should not hesitate to inject your cash into raw farmland because it is generally a niche with less competition. Additionally, it is easier to buy undeveloped parcels of land as most landowners earn no income from them, so they easily accept money in exchange.
Buy land at prices that are way below the standard market prices and sell them at extremely high prices because it is possible.
8. Investing in Real Estate Syndications
Here, sponsors operating as lead real estate investors go out in search of members to invest money. These new members do not lend money, unlike in real estate crowdfunding. They instead earn true ownership and shares in the investment.
Only accredited investors are eligible to invest in real estate syndications, and they get tax benefits because they are the actual owners.
Members are first made to understand the terms and conditions they are willing to enter themselves into, simply because most investments of this kind are long-term, so you just can’t sell the property when you feel like.
Just like in any other investment, you should always ensure that you first understand the rules of the route you go. Alternatives to real estate investors come with benefits such as tax advantages, volatility protection, and access to assets with potential for higher returns. And they come with their challenges, for example, the risk of negative tax, illiquidity of some assets, and individual volatility.
The alternative investment industry is growing rapidly, so you can easily invest and start earning huge perks within no time at all. Even retirees don’t have to worry about age because borrowing seed capital from a real estate alternative investment fund is much easier than you can realize.