This is my second post for Types of Investments . The first part talked about savings, stocks, bonds and mutual funds.
Real Estate
When talking about rental real estate, people are often referring to income generating rental properties. The idea is by putting down a percentage of the purchase price and then borrowing the rest from the bank to create income. When a tenant pays rent, this rent should cover the mortgage, insurance, property taxes and other monthly expenses. The rent can also include a property management fee. The goal is to have money left which is positive cash flow.
The downside to rental real estate it takes the average person a lot of money to get started. Also if the tenant moves out, then the owner of the property must now pay the mortgage. Rental real estate can have a high "Pain in the ass" factor for those who do not use a proper manager such as early, early morning toilet problems.
Is there a way for people to get involved in Rental Real Estate without being a landlord? The answer is yes. REITs, or Real Estate Investment Trusts, are income trust that buy real estate. A REIT trades on a major stock exchange. By law, a REIT must pay out at least 90% of their profits as a distribution to its unit holders. REITs can be involved in residential housing, apartment complexes, retail centers, office space, seniors housing, medical facilities etc.In order for a REIT to grow, it will issue more units (i.e. shares) to build up a cash . The yield on a REIT is usual high such as 6%. REITs make it easier for the average person to invest in commercial real estate as this would be really expensive.
Business
Starting a business is one of the most profitable avenues that an investor can take. Starting and running a business is the hardest to maintain out of all the asset classes. When running a business as a corporation, the business can have enormous tax deductions.
DISCLAIMER:
A short but good post!
ReplyDeleteI personally would also prefer REITs.
I would never buy a house and then rent ...
Too much stress and possibly trouble!
Do you have recommendations for REITs?
I know in the U.S. HCP and O.
regards
Currently, I prefer REITs as well. That might change in the future.
DeleteIn Canada, I have owned REITS. I owned Transglobe REIT which was then was acquired and taked privately by their largest unit holder. I owned Homburg REIT which changed its name to Canmarc REIT. Canmarc REIT was then acquired by Cominar REIT. I owned Whiterock REIT which was acquired by Dundee REIT.
I currently own Dundee REIT and Cominar REIT as indicated in my investing account tab above.
I would not buy a REIT outside my country unless I was buying inside a registered account. So for Canada, I would be hesistant to add to my current REIT positions and initiate any new positions as they have been beaten down as of the last 4 months.