" Investments in Real Estate . "

Real estate investment involves the commitment of parking your funds to property with
an aim to generate income through rental or lease in order to achieve capital appreciation.

Real estate refers to immovable property, such as land, and everything else that is
permanently attached to it, such as buildings. When a person acquires real estate, she/he
also acquires a set of rights, including possession, control and transfer rights.

Understanding real estate investment is crucial because it usually involves a substantial
investment and a long-term one. Moreover , the real estate market can be unpredictable.
This is particularly important when one goes beyond buying a home to actually 'investing'
in real estate.

There are a number of ways in which an investor can participate in the real estate market :

1. Real Estate Investment: Rental

One can opt for real estate investment with an aim to rent the property out to a tenant or
invest in a property which is already rented out and yields rental return from day 1 .

The owner (landlord) earns a continuous stream of rent from the tenant, but is responsible
for paying the mortgage, taxes and any costs associated with maintaining the property.
The owner also benefits from capital appreciation (a rise in the value of the property over time).
As compared to owning stocks and bonds, rental real estate requires a significant amount
time and effort to be devoted by the landlord .

2. Real Estate Investment Groups

Real estate investment groups are similar to small mutual funds. They are set up for rental properties. While an investor may own one or more units, a professionally managed company acquires, builds, maintains and lets out all the units on the properties in exchange for a percentage of the monthly rent.

3.Real Estate Trading

Real estate traders hold properties for only a short span of time (less than four months), aiming to sell them at a profit. This process is called flipping properties. Investors aim at purchasing significantly undervalued or very hot properties. Such owners may or may not invest money into improving the property before putting it back on sale. A bear market could result in substantial losses for a real estate trader, since the investment is large.


4.Real Estate Investment Trusts (REITs)

A real estate investment trust (REIT) is a corporation that invests in real estate. REITs trade on major exchanges. A REIT uses investors' money to acquire and operate properties.

The benefits of REITs are:

• REITs provide fairly regular income.
• Investors gain exposure to non-residential investments (like malls and office buildings).
  
• REITs are highly liquid.
• REITs are required by law to distribute 90% of their taxable income in the form of dividends to shareholders.
  

Dt. 22 . 01 . 2010