As time goes on, it looks like more and more people are interested in investing into the real estate world. The issue is that it takes lots of capital to buy revenue property that most people just don’t have. Sometimes, you may have the capital but don’t want to get into the nitty gritty of property management and tenants! Real estate can be complex and is truly a long term investment that takes hard work, heavy capital and sweat equity! So here are 3 ways to invest into real estate without all the hassle!
REIT – Real Estate Investment Trusts
In simple terms, a REIT is essentially similar to a stock, but instead of investing into a publicly traded company that sells phones, electric cars or a financial portfolio, a REIT is a company that holds, manages, invests and finances revenue generating real estate and takes care of all management aspects so that you (the investor) can input smaller amounts of capital (i.e. 1,000$ +) and still technically own a piece of “real estate”. This investment works just like a stock or a mutual fund, but is based on real estate, and the income generated from real estate investments. – It allows investors that do not want to manage property the capability to invest 5, 10 or even 100,000$ into the real estate world without all the nitty gritty that comes with property ownership.
REIG – Real Estate Investment Groups
A real estate investment group is by definition exactly what it sounds like. Think of a group of people with similar investment goals that partner up, draft legal documents as contracts with one another and rules that everyone must follow. Now these individuals pool together an equal sum of money, and their chairman then takes the capital and invests it into Real Estate, These groups typically target revenue generating properties, flip opportunities and any opportunity that will allow them to keep growing their capital and continue to invest more broadly. Although these types of groups typically need more than and REIT (Usually $25,000 – $50,000 minimums) they are still interesting for novice investors with smaller capital and are also a little more hands on where you can know exactly what is going on and where your money will be going.
Mortgage Backed Securities
Mortgage backed securities (MBS) are essentially an investment product (that you can purchase from a bank, an investorline etc) that basically consists of property loans, refinances, and any other real estate related debt issued by a certain bank. As an investor in an MBS, your investment is very similar to a bond in the sense where you will receive periodic payments similar to a bond coupon payment. This type of investment is called an asset backed security that are essentially formed as mentioned above by pooling together debt created by mortgages, technically … you can call yourself the bank, as you’d be the one investing into the bank so that they can then lend money to the home buyer .
Although there is a lot more information that can be shared for any one of these three types of interesting investment strategies, We will let your financial advisors or bankers dive into more detail. The truth be told, in the long term brick and mortar has always been the safest investment. Buying a building vs. an REIT is very different and should not be compared, but for those who want to invest their money into the real estate world with limited capital, these are truly great options!