Real Estate Investments

The following is a sample article written by ContentWriters for a client in the real estate industry

Many new investors are enamored with the idea of real estate investments. You can buy low, sell high, and even make rental money in-between. In addition to that, housing markets are as strong as they've been in a long time. Unfortunately, this conventional method of real estate investing takes more capital, time, and effort than many traditional investors have. Luckily, there are plenty of options for investors who want to add some real estate to their portfolio.

Equity vs Debt

  • Equity-based. Equity-based investments are riskier, but also provide a higher return over time. This includes actual real estate, stocks, mutual funds, and real estate investment trusts.

  • Debt-based. Debt-based investments are less risky but provide a lower return. If inflation is high, they may actually lose value over time versus inflation. These include savings accounts, corporate and municipal bonds, and annuities.

There are three very popular types of real estate investments.

Real Estate Investment Trusts

A real estate investment trust is a company that manages a real estate portfolio for you, much like any other fund. They require lower investment minimums and relative security. In an apartment building, for example, you might be able to own two or three units, instead of having to invest in the entire property.

REITs are especially popular since you can invest on leverage. One of the most popular REITs, Annaly Capital Management (NLY), for example, offers yields that are up to 17%. If your purchase is levered 10x, that means that you can more than double your investment in a year!

REITs are riskier than other types of funds, however, which is why their returns are so high. It's also much easier to lose a significant chunk of your bankroll when trading on leverage, so it's important to make sure not to invest a significant amount of your portfolio in REITs.

Mezzanine Debt

Mezzanine debt is a very high-risk, high-reward investment. A typical rate can reach 20% annually. A mezzanine investment is offered when typical debt isn't sufficient for an investment. At this point, the lender will seek out a smaller mezzanine loan that's paid back at a much higher rate. You're more of an equity holder than an investor, and you may also enjoy options like a small piece of ownership or the option to purchase equity at a future date.

Bridge Lending

Bridge loans are like mezzanine loans in that they fill the gap that traditional loans can't. Bridge loans are extremely short-term, usually six months or less. A bridge loan gets its name from the way it bridges the gap between the purchase and sale of a property. Usually, bridge loans are used for things like construction or improvements. Bridge lending is extremely popular since it can offer a yield of over 10% in an extremely short period of time.

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