Wednesday, November 13, 2013

Types of Investments - Part 2

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:

     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

2 comments:

  1. A short but good post!
    I 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

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    Replies
    1. Currently, I prefer REITs as well. That might change in the future.

      In 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.

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