Investing in a Real Estate Investment Trust

There is a common misconception when it comes to taking part in real estate investing and that misconception is that an individual must be a “big money player” in order to wheel and deal in property. This assessment is a rather inaccurate one as there are a great many opportunities available to those who only have a modest sum to invest. (And, no, this does not refer to those wild over the top opportunities that are available on late night infomercials!) If there was a solid way to invest in real estate with a limited amount of capital it would involve in investing in a REIT – a Real Estate Investment Trust.

For those not familiar with what a REIT entails, probably the best description of it would be sort of mutual fund that invests in properties. That is, the REIT will involve a multitude of properties and interest will be paid on the success of these ventures. The way in which money is earned on a REIT involves the purchase and sale and/or management of property, and rental income (equity REIT); the lending of money for real estate purposes (mortgage REIT); or a combination (hybrid REIT). So, instead of venturing out into these investment options on your own you can invest in a collected managed portfolio of these ventures in the form of a REIT. Again, this is no different than a mutual find and comes with relatively low risk and low initial capital investment. Of course, you could also invest big as well as seek aggressive and volatile REITs as the choice is up to the investor.

Flipping Property as a Real Estate Investment

There are a number of different methods an individual can employ in order to turn a profit in real estate investing and one of the most common is what is known as flipping a property. For those not familiar with what this term refers it means that one purchases a property at a low price and then quickly sells the property at a higher price. Usually, this is done by way of repairing or adding to the property so as to increase its value. For example, if one purchases a home that has a roof in disrepair and then fixes the roof the equity of the home might modestly (or dramatically) increase. The property is quickly sold – aka flipped – and the increased equity is collected as profit. Does this sound easy? Well, in a way it is but it is definitely not a process that comes without risk.

Case in point, if a the property deemed to be “flipped” turns out to require more repair work than what was previously expected or if there are other issues to contend with such as declining real estate value then the property might even turn out to be a money loser for the investor. Granted, tax write offs may make the venture salvageable but this was not the original intention. If there was any advice that could be offered here it would be approach flipping a property conservatively and not try and make a “killing” by attempting to flip a large volume of property. Start slow, take it easy and then let business develop from there.