There are many ways to invest in residential property, accessible at basically all levels. Perhaps the most familiar is traditional purchase of a single-family home using a mortgage.
One could buy homes at foreclosure auction, purchase interests in loans, speculate on mortgage defaults and so on. However, some investments work at a larger scale. This article will look at two ways to handle major developments, such as planned neighborhoods, apartment buildings, mixed residential-commercial portfolios and so on.
Real estate investment trusts have become very popular in recent years. They offer, among other things, a way for smaller, individual investors to gain access to the market. As explained on REIT.com, many trade actively on major exchanges. An REIT could hold several rental properties, for example, distributing the profits on a share basis.
REITs must have at least 100 shareholders and meet other stringent requirements, so anyone interested in establishing one of these should make sure everything is in order before proceeding. For prospective investors, due diligence into the company’s holdings is often wise.
Converting to condominium could be an option, especially for smaller real estate portfolios. As explained on FindLaw, condo sales are similar to home sales. This results in the transfer of ownership of specific parcels of property — as opposed to an REIT, which has stock ownership that trades as a security.
For rental development owners, a conversion could be a good exit strategy, as it would allow some level of liquidation and a reduction of management responsibility. For buyers, the advantage is often having a physical site to use as a home or rental property.
Most individuals would never have to form an REIT. However, these companies may purchase buildings or developments to expand their portfolios. Conversely, condominium conversion could be accessible to nearly anyone who owns a sizeable rental property. Either way, it is important to understand everything from a legal perspective before signing any documents.