Investing in Real Estate Securities for High Yield

Investing in real estate requires investment of not only money but also time and efforts. If you do not want to buy a property, rehab, maintain or even rent it out but yet want to enjoy the fruits of investing in real estate, then real estate securities is the right way forward for you. If you have another business but yet wish to dip your fingers in real estate without investing your precious time, then you can choose from any of the following real estate securities.

? Real Estate Limited Partnership. One of the ways to enter into the real estate market without any day-to-day hassles is to become a limited partner in a firm that actively deals in real estate. There can even be additional limited partners in one firm. A general partner will be assigned the task of managing the daily affairs of the company including buying and selling of properties, renting it out, collection of rent, managing expenses, etc. Limited partners can act only in case of any gross mismanagement by the general partner that would necessitate his or her removal from the firm. As a limited partner, you will be able to receive a portion of the profits that your firm generates. The returns in this mode are quite high but so are the risks since there might be many partners involved in a single company. 
? Real Estate Investment Trusts [REITs]. These are companies that must shell out at least 90% of their net income to its shareholders. These companies purchase and oversee various real estate projects and the income generated from such ventures is subject to single taxation at the investor level. Thus, the returns to investment in such an instrument is quite high. There are various REITs that specialize in acquiring, managing and disposing several property sectors such as residential homes, apartments, commercial offices, hotels, warehouses, etc, and even by different regions. This method offers modest capital appreciation in the long run.  
? Real Estate Mutual Funds. Real estate mutual funds invest their money in select REITs and even in other publicly traded companies that are active in the real estate market. These mutual funds thus offer a high yield in the form of dividends. The only problem is that due to the dual fee structure, you will need to pay management fees and expenses to the management of REIT as well as an additional1 to 2% fee to the manager of the real estate mutual funds.  
? High Yield Private Mortgage Notes. Professional real estate investors normally use these notes in the form of loans. They use them to buy, rehab or even equity cash out of various properties that generate income. These notes are also completely guaranteed by matching collateral in the form of productive real estate. These loans are normally for a duration of one year and never exceed 65% of the currently appraised value of property and the income generated is in the form of interest payments. These loans also take less time to get processed as compared to traditional loans that are advanced by lending institutions. Since these loan are backed by real estate, the borrowers credit is not a major problem while securing them. Investors have an opportunity to earn around 12 to 18 percent by investing in these instruments.  

If you are new to such investments, then hire the right professionals to guide you on the best securities that can provide you with the highest returns with the lowest risk. Investing in real estate securities is thus a profitable alternative to directly dealing in real estate.  

Written by: SP
Date Written: 03-07-08
Reviewer Assigned by: David
Reviewed by: AL 
Quality Control: AG
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Quality Control Completed on: 04/07/2008