Real estate investing, a hot area in recent past, has become a bit of a pariah with the retail investing public. With the collapse in house prices, and in commercial real estate –prices, and the fleeing or disintegration of the hot money, it is no surprise that people ran for the exits.
In the past year and a half, value investors have ventured back into the water and have begun to purchase foreclosed and distressed properties – both on the individual level and at the institutional level. How can one get involved in real estate investing?
- Purchasing a piece of property directly (the obvious way)
- Purchasing property pooled with other investors through a partnerships, LLC or other structure
- Purchasing shares in publicly listed Real Estate Investment Trusts (REIT)
- Purchasing an “exchange traded fund” or “ETF” which holds a basket of real estate investments
- Purchasing private real estate funds (often only offered to “accredited investors” – i.e. high net worth investors meeting specific guidelines set by the SEC)
- Purchasing property through a “self-directed IRA” account
There are other ways to buy also – each way has benefits and drawbacks. For example, to maximize tax deductions, own direct real estate which allows investors to deduct operating expenses, interest payments and depreciation expenses typically. If most of your liquid assets are in an IRA, and your style is to buy undervalued property to resell, then using your IRA may benefit you as it shields short term gains from taxes. It really depends on many factors which real estate investment option, if any, is best for any one person.
If you have questions regarding real estate investment, feel free to contact us. We provide number-crunching analysis for our clients and work with a number of other qualified professionals in legal, tax and real estate to help our clients make smart choices that fit into their comprehensive financial plan.
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