Investment alert: According to RISmedia, the most significant innovation to hit the residential real estate market in decades occurred in 2012 to little fanfare: A first single family REIT (real estate investment trust) went public. For the first time in history, everyday people can now own shares of the American Housing Market, one share at a time. Not since the creation of the 30-year fixed mortgage can so much capital flow into the single family market as will flow into it in the next ten years, via single family REITs.
And what, you may ask, is a REIT? The letters REIT stand for real estate investment trust, which is sometimes called "real estate stock." Essentially, REITs are corporations that own and manage a portfolio of real estate properties and mortgages. Anyone can buy shares in a publicly traded REIT. They offer the benefits of real estate ownership without the headaches or expense of being a landlord.
Howstuffworks.com advises that investing in income-generating homes can be a great way to increase your net worth. But for many people, investing in real estate is simply out of reach financially. But what if you could pool your resources with other small investors and invest in real estate as a group? REITs (pronounced like "treats") allow you to do just that.
As well as providing a tax benefits for investors, single family REITs provide a path to homeownership to everyone with a minimum down payment of one share. In this way, it is lowering the barrier to homeownership – to $100. Imagine if, instead of buying a $200,000 house with 20 percent down, a family opted to lease a $200,000 home and put the $40,000 into the REIT that owns it. They would then own shares in a portfolio of thousands of houses, including their own. Their down payment money would be in houses, including their own, and be completely liquid.
Simply put, real estate investment trusts (REITs) give investors a chance to invest in real estate without the added risk of buying real property. Single family REITs offer a way for people to get in on the institutional investment of homes for conversion into rental units. The collapsed U.S. housing economy and accumulation of distressed homes has given large-scale investment firms an opportunity to buy in bulk, and now many are looking for public funding through REITs. Click here for more info.
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Karen Breen Elia & Louis M. Elia, REALTORS®, are brokers for homes, condos, and multi-unit properties on Chicago's North Side.
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