Better Known Options For Real Estate Investment

Posted by Alan Zunec on Thursday, March 14th, 2013 at 12:33pm.

Investing in the stock market is not for the faint of heart. Looking at the decade between 2000 and 2010 makes it easy to understand why some people are frustrated if not totally disillusioned about the process. Some investors are turning to real estate, which at present is providing a greater return on their money. There are a number of ways to get into the real estate investment game.

Invest in Property Directly

This is the most common way to invest in real estate. Buy a home, condo or apartment and then rent it out for the short term. Eventually you’ll sell and make money on the equity. Other buyers invest in properties and flip them right away, skipping the renting altogether. Still others go in for commercial properties, which may be riskier sometimes but usually bring in bigger returns. If you don’t want to go it alone, create an investment group and pool your resources.

Syndication Real Estate Sales

Syndication is a type of investment group. One leader, known as the syndicator, finds a property of interest and then finds investors willing to go in on the deal. The investors may own partial shares in the property, or own individual titles. Be sure and study any real estate syndication groups you are considering, as there are many forms. The legal agreements can be complex and accompanying commissions and fees can be on the high side. Most often it is the original syndicator, the leader, that takes home the lion’s share of the profits. Read the fine print.

Consider Real Estate Funds

Real estate funds might also be a consideration. They aren’t that common, but two, the Investors Group Real Property Fund and the Great West Life Real Estate Funds have decade long histories and each has somewhere between $3 and $4 billion in assets. GWL, the latter, did quite well in 2012, with a return of roughly 16.3 percent. If you are investing on the short-term this may be a risky way to go, since some years may see a loss in revenue. GWL posted one-year losses roughly 27.7 percent of the time over a 25 year period. There were also some periods when investors had no access to their money.

Look at the REIT - the Real Estate Investment Trust

You can buy property through a REIT by becoming a shareholder in that entity. The REIT purchases the property via the stock market. In most ways it is just like other stocks. REITs do pay profits and income annually to their shareholders. This way the REIT has no tax liability, but the shareholders pay the taxman through their dividends. RioCan is the largest REIT in Canada and usually invests in shopping malls.

Real Estate Exchange Traded Funds – EFTs.

This is a way for investors to put part of their financial portfolios into the real estate market. The oldest and largest ETF index is the iShares S7P/TSX Capped REIT. Similar to the regular REIT, investors buy into real estate deals while avoiding direct sales, management duties or contact with tenants. Management fees on EFTs are lower than on REITS.

These are some of the better known ways for real estate investment. No matter which method you choose, be sure and study that method. A little homework up front will lessen your chances of losing a considerable amount of cash after the fact.

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