A Helpful Guide to Real Estate Investing
Interested in Real Estate Investing? Have you thought about purchasing real estate? If so, the first thing that likely comes to mind is your own home. The fact is, there is more to real estate investments than just your home. In fact, it has become a popular investment vehicle in the past five decades and purchasing and owning a brick and mortar property is more complicated than investing in bonds and equities. Learning more about the process is the best way to ensure you know what you are doing, and that you get the results you desire.
Real Estate Investment Groups
While there are quite a few real estate investment options out there, one that is gaining popularity is real estate investment groups. These are similar to mutual funds but for rental properties. For individuals who want to be rental property owners but avoid the hassle that goes along with the job a landlord does, then this option may be the best solution for you.
Allrise is a unique type of investment, as this is a company of private equity lenders. This means the company isn’t held to the same restrictive guidelines that banks have to adhere to. With this investment option, you can invest amounts that are as small as $250,000, which will be pooled into a fund. Each of the loans funded by Allrise will be backed by actual real estate as collateral, which means you can feel confident that your capital remains secure. With this company, your investment is protected from start to finish.
In addition to providing solutions for owning residential properties, Allrise also offers commercial financing solutions. With this company, individuals can open a small business or purchase commercial property, regardless of their credit history.
The Real Estate Limited Partnership – RELP
A RELP is very similar to the real estate investment group. RELPs are entities that are created to purchase and then hold the portfolio with properties in it, and in some cases, a single property. However, the difference is that it is only around for a certain amount of time.
With this type of investment, a real estate development firm or property manager will serve as a general partner, and then outside investors will be found to provide the financing for the project in order to receive a share of ownership as a limited partner. This type of program allows for the renovation or construction of buildings without having to get involved with the management process of having real estate experience.
The Real Estate Investment Trust – REIT
This is created when a corporation (or trust) is created and then uses the investor’s money to purchase, operate and also sell income producing properties. The REITs are purchased and sold on all the major exchanges, the same as any other stock. In order to maintain the status as a REIT, the entity has to pay out 90 percent of all taxable profits in the form of dividends.
This type of investment is ideal for stock market investors who want to earn a regular income, along with appreciation. With the REIT, an investor can get into non-residential properties, including healthcare facilities, office buildings, malls and more. REITS are also highly liquid.
The Bottom Line
When it comes to building an investment portfolio, real estate is usually considered as an alternative investment. What this means is that it should be treated as supplementary to build on the primary portfolio of securities, bonds and stocks. However, it can serve as a counterbalance to other instruments in addition to being an income source and eventually lead to appreciation.