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Investing in real estate can be very lucrative, but getting started in real estate investments typically requires a large amount of capital.

 

So, if you do not have hundreds of thousands of dollars on hand, there are many other ways to invest in real estate without actually buying a physical property.

 

REIT

 

REIT stands for real estate investment trust and is a company that owns and manages real estate and related assets. For example, assets such as mortgages or mortgage bonds. The majority of REIT’s income and assets have to be linked to real estate. To qualify as a REIT, companies must meet these standards and rules defined by the Securities and Exchange Commission:

 

  • Invest in at least 75% of total assets in real estate assets
  • Obtain no more than 50% of shares held by five or fewer individuals
  • Derive at least 75% of gross income from property rent or mortgage interest
  • Pay at least 90% of taxable income as shareholder dividends
  • Have a minimum of 100 shareholders after its first year as a REIT

 

Invest in a Real Estate Focused Company

 

A lot of companies that own and manage real estate are not structured as a REIT. These companies have stocks that usually pay a much lower dividend than a REIT. The business itself, however, has more freedom to reinvest profits to expand.

 

There are many companies in various industries that behave like a real estate company even though that is not the primary service they offer. Some examples of this include, hotel chains, resort operators, and shopping malls and strip mall managers.

 

Invest in Home Construction

 

Real estate is much more than just buying and profiting from existing companies. There is a homebuilders industry responsible for developing new neighborhoods in growing metropolitan areas. These companies are most likely involved in more than one ways of the home construction process.

 

When you are evaluating homebuilders, make sure you look at every aspect of the business. Then, take a moment to see if the company is focused on a region with poor real estate performance or if the company is focused on high or low-end  homes. Then compare the focus to real estate trends.