When the conditions are right, real estate investment can be a lucrative venture. However, a buyer’s immediate access to funding, market volatility, available stock, and timing can make or break a potentially profitable undertaking. There can also be complications with raising enough capital and getting through a protracted real estate transaction. One alternative to a traditional real estate purchase is to invest in a real estate investment trust or REIT. Here is more on understanding real estate investment trusts (REITs):
Real Estate Investment Trusts (REITs)
A Real Estate Investment Trust or REIT is an investment option that allows someone to have a partial investment interest in properties without having actual possession. Private companies own the real estate at issue, which can include structures such as office buildings, apartment complexes, commercial spaces, and hotels. When investing in a REIT, the investment is in the company that owns the group of properties, and not in the real estate itself.
Equity REITs – These are REITs centered around property equity. Their value is focused on selling, managing, maintaining, and flipping real estate. The value of these REITs is represented in subgroups of the market, such as commercial real estate.
Mortgage REITs – These REITS focus on mortgage investment and lending. These are the companies that buy existing mortgages, purchase mortgage-backed securities, and lend money to borrowers for mortgages.
Hybrid REITs – As the name implies, hybrid REITs are a combination of equity REITs and Mortgage REITs.
REITs as an Investment Option
Depending on the type of REIT you choose and market conditions, REITs can produce consistent returns and pay higher dividends. REITs are also usually more liquid than traditional real estate investments. For instance, selling a publicly-traded REIT is ordinarily less cumbersome than having to wait for a property to sell. Because REITs are pooled with others, investors don’t have to supply as much capital to invest. However, investors don’t have control over what happens with the underlying properties or lending products and, therefore, the investments. REITs are also dependent on the volatility of the real estate market, and factors such as tenant occupancy and property supply and demand can impact the value of an investment.
David E. Klein Esq. and Guy Rabideau, Esq. are Florida Bar Board-Certified Real Estate Attorneys with the experience you need for all aspects of your Palm Beach County real estate transaction. We have the expertise and local knowledge you need to ensure that your interests are protected during every stage of the process. Contact Rabideau Klein today to discuss your real estate legal needs.