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Beginners Real Estate Investing Guide
Real Estate Investing - Ask
Questions Before Making an Investment
First Time Real Estate
Investor
Real Estate Investing - Planning
Your Investment Strategy
How to Find Real Estate
Investment Properties
Getting a Professional Home
Inspection
Large Profits From Inexpensive
Real Estate Repairs
Real Estate Investing - Costs
and Fees
Real Estate Insurance
and Risk Management
Real Estate Investment Risk
Part 1
Real Estate Investment Risk
Part 2
Getting The Best Return For
Your Investment
Creative Financing
For Real Estate Investors
Real Estate Investment Tax
Considerations
Real Estate Rental Properties
- Great Investment or Nightmare
Real Estate Foreclosures - Great
Deal or Headache
Flipping Real Estate for Profits
Slow Return On Real Estate
Investments
Negotiating for the Best Possible Real Estate
Deals
Real Estate - A Time to Buy and a Time
to Sell
Creating Your Real Estate
Investment Strategy
Investing and Growing
Your Real Estate Portfolio
Commercial Real Estate
Investing
Real Estate Marketing
Understanding Real Estate Law
Do You Need An Real Estate Agent?
What The Real Estate Mortgage
Lender Sees
Do You Have A Career In Real
Estate?
Rural or Urban Real Estate
Investments?
Real Estate Investing on the
Internet
Real Estate Investing
- Property or Paper? |
Real Estate Investing - Introduction
Real Estate Investing - Property or Paper?
When you think of real estate, you probably think about inspections, appraisals,
tenants, repairs, and more - and it may even make your head pound. Real estate
investing, however, can be very profitable, and if you think of it as an
investment for your future, the pounding in your head will probably recede.
One form of real estate investment is REITs, or Real Estate Investment Trusts.
These are actually mutual funds that are invested in real estate. The funds
may be invested in actual property, or in a mortgage. REITs trade on the
major stock exchanges, and there are those that professionally manage such
investments. These investments also have special tax considerations. You
will find that while all investments have risks associated, these are the
least risky investments, and they have the highest profit, and the greatest
liquidity potential as well.
An Equity REIT is a trust that invests in and owns property. These properties
are usually rented to others. A Mortgage REIT, however, is a trust that invests
in mortgages, instead of property ownership. The money earned from these
investments comes from the interest that is paid on the mortgage. A Hybrid
REIT invests in both types.
Unlike other funds, REITs are mutual funds that have a certain number of
shares. Once you've sold those shares, they cannot be redeemed through the
fund. REITs are bought and sold through a broker, to other investors.
REITs are mostly paper investments. To have an REIT, at least 90% of the
taxable profits are paid to shareholders. They are similar to small-cap stocks
in that the total return is the dividends plus the price apprciation. They
are hugely affected by interest rates, as the interest rate increases, the
REIT price will decline.
Mortgage backed securities, or MBS, are also paper investments. These are
bonds where real estate is backed by a group of mortgage loans. About 2.8
trillion dollars are invested in such loans each year in the United States,
and about 80% of those are covered by MBSs.
Mortage Security investors earn a coupon rate interest, just as they do with
other bonds. But they also receive repayments of the principle of the loan
in scheduled payments for the life of the security, just as the mortgage
is paid off, unlike other securities, where one payment is made at maturity.
MBS have specific advantages, one of the biggest being that they are incredibly
stable.
The biggest disadvantage of MBS is the effect that the interest rate changes
have. When mortgages are pre-paid, the interest rate changes. The fact that
so many people pay off early when the interest rates are lower, has a huge
impact on the value of the investment made in an MBS. Therefore, it may be
better to avoid investing in pre-payable MBSs, and invest in closed MBS
instead.
The terminology in real estate investing can get very confusing, but it is
important to learn. CMOs, or collateralized mortgage obligations, and REMICs,
real estate mortgage investment conduits, are similar to REITs, and have
the same risks and benefits. Fixed Income Exchange Traded Funds, or ETFs,
are also mortgage backed securities, and they are bought and sold on the
stock exchanges.
An Individual Retirement Account, or IRA, will allow you to add assets to
that fund, and those assets can be land, single-family homes, apartments,
and commercial buildings or other real estate, instead of cash deposits.
Real estate investments allows you to take advantager of the benefits of
real estate investment, without have to deal with managing the property.
Before making any type of investment, you need to get the advice of an investment
professional. In fact, because you may be taken advantage of, get the advice
of several different investment professionals!
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Beginners Real Estate Investing Articles
How to Advertise a Rental
Property
How to Build Equity
in any Real Estate Market
How to Find Motivated
Sellers
Developing a Profitable Real
Estate Investing Strategy
Bird Dogging: Getting Started in
Real Estate Investing
Buying Your First Home
Using Lease Options to Purchase Real
Estate
Real Estate Foreclosures
Increase Your Net Worth Through
Real Estate Investing
Interest Only Mortgages
Real Estate Investing
No Money Down Real Estate
Investing
The Power of the Lease Option
Real Estate Investing Tips
Real Estate Investments
Refinancing Your Mortgage
Loan
Paying Your Mortgage
Selling Your House without a
Realtor
"Subject To" Real Estate
Financing
Using Trusts as a Real Estate
Alternative
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