REAL ESTATE INVESTING MINUS THE HEAVY PRICE
Investing in a property can certainly be expensive, but undeniably advantageous as well. However, for those who do not have the ample amount of capital to get started, it is good to know that there are several options to push through with their plan without having to purchase a pricey establishment. Here are a few investment areas to consider as an alternative
REIT A real estate investment trust is a firm that handles assets related to properties such as mortgages, and have most of their holdings and income linked to it. There are also qualifications that companies should meet before being regarded as a REIT.
- At least 75% investment in real estate assets
- 75% of wages from a rental property or mortgage interest
- A minimum of 100 shareholders during your initial year
- Half of shares owned by five individuals
- 90% of compensation of taxable income as dividends
The final standard is probably the most significant one, given that a REIT is not a mere business which owns an structure--they also provide cash flow to investors. This will aid you in developing your portfolio until you can buy your own properties yourself.
Real estate-concentrated firms Stocks of these types of businesses give back a lower dividend than the first one, but allows more room for reinvestment and profit expansion. Examples of these companies are hotels, shopping centers, and resorts. Like any investment, it is crucial to do research before plunging into one especially since laying out your money on a single industry will leave your portfolio vulnerable to concentration risk.
House building Contrary to usual notion, this field is not all about buying and owning establishments. The construction industry responsible for developing communities and metropolitan locations is another area you can venture on as well. However, it requires intensive assessment beforehand, such as determining whether the company’s region has a poor real estate performance, or if they are more focused on high end homes instead of low end ones. Remember that these conditions are highly connected to the economy as well, as unemployment results to a sluggish home sales while a strong job growth will have the opposite effect.
Real estate mutual fund One of the most difficult obstacles in this kind of investment is diversification, since it is not a retail type wherein shares can trade for an affordable price per share. To counter this, investors may resort to mutual and index funds or ETFs. Some of these work just like a usual fund, which prioritizes property investments while others are more invested in REITs or direct purchases.
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