The Bull Hunters Guide

Last time around, we talked about the usefulness of real estate as an alternative Investment opportunity. While the advantages of real estate are manifold, it’s certainly not for everybody. Why is that? Simply put, it’s expensive!

However, there is an option for those people who want to become involved in the real estate market but who don’t have the cash on hand or the credit needed to purchase a home or any other piece of property. The answer is Real Estate Investment Trusts, or REITs.

Types Of REIT To Consider

REITs are a commodity sold on the open market, much like stocks, except you’re Investment in real estate properties instead of in companies. The value of the REIT will usually vary and will depend upon the real market value of the property in question. There are three types of REITs to consider.

Equity REITS are associated directly with properties that are owned. There is, then, a responsibility for the upkeep and value of those properties. The revenue generated for the REIT in this case will come from the rents paid on the associated properties.

The second type of REIT is the mortgage REIT which should be thought of more as a loan instead of an outright purchase. In other words, this type of REIT loans out money to be used for mortgages for property owners. The revenue from them comes mostly from the interest that is owed on the payback of these loans.

Lastly, there’s the hybrid REIT, which as the name suggests, is a useful combination of the two. It invests in both properties and mortgages in an attempt to diversify where the revenue comes from.

REIT Investment Risks

The only real risk associated with a REIT lies with the state of the real estate market in general. If the market is performing well, a REIT will be a valuable Investment to hold. Otherwise, it will not experience much growth. In this sense, it operates very much like a trust fund, and is just as safe.

See you next week for part 16 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Tags: Bullhunter, Investing, Investment, Real Estate Investment Trust, REIT

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