Investor

Real estate investment is a complicated field, with a lot of money changing hands. If you'd like to expand your investment portfolio, real estate is a very popular way to do it. This guide will help get your money invested properly.

1. Learn about real estate investing. In order to invest in real estate successfully, you should research the subject thoroughly and be well-versed in how the market functions. There are multiple ways to invest in real estate, and you will need to evaluate your goals and finances to decide which option is best for you. Real estate is "an interest in land" (and anything permanently attached to land). This means that the real estate market is essentially about buying and selling land and buildings. There are two types of "interest" at work in real estate: ownership and leasehold. "Ownership interest" is taking full control of and responsibility for land and buildings, and "leasehold interest" is the granting of certain rights to a tenant in exchange for rent payment. The most common form of real estate investing is purchasing ownership interest in a property and then earning money from rent paid by tenants.

2. Identify your tolerance for risk. There are two main markets when dealing in real estate. These are the private and public markets. Any investing is risky to some extent, but each market has its own level of risk. Private real estate involves the purchase of an ownership interest in "real" (as opposed to "personal") property. You or a property manager would then operate that property and you would earn money on rent paid by tenants. This is a very direct way of investing in real estate because you, as the owner, are responsible for the property. Public real estate involves purchasing shares of a publicly traded real estate company. Often these companies take the form of investment trusts. You buy shares on the market and are paid dividends as the trust collects rent and value from the multiple properties it owns. Because you only own shares in the company, you are not responsible for the real estate. This is a less direct approach to investing.

3. Decide between equity and debt. Both the public and private markets operate on equity and debt. As an investor you pick which of those you would like to invest in. If you are investing in debt, you lend money to someone so that they can buy interest in a property. You earn money in the form of interest payments on a mortgage. If you are investing in equity, then you are investing in ownership of the property. This means you are assuming all responsibilities for the operation of the land and buildings.

4. Choose the real estate sector you want to invest in. The four sectors are public equity, public debt, private equity, and private debt. If you choose public equity, you will want to look at investment trusts. If you choose public debt, you should investigate mortgage securities, which are the debt equivalent of investment trusts, where various mortgages are bundled together to form a single investment. If you select private equity, then you will most likely be purchasing residential or commercial property and acting as a landlord. If you choose private debt, you will invest in private mortgages.

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